Climate change is no longer a story of the distant future. The massive crisis facing the world is more than just an environmental issue; it is shaking the very foundations of our economic system and demanding a new order. In particular, the new climate regime and the transition to a net-zero economy will require companies to survive like never before, making ESG management more than just a fad, but a necessity.
Addressing climate change is a necessity, not a choice
Global warming is creating unprecedented threats, including extreme weather events, sea level rise, and ecosystem disruption. 2023 was recorded as the hottest year on record, and extreme weather events such as heat waves, droughts, and floods are becoming more frequent around the world. These changes are not only threatening human livelihoods, they are also severely disrupting businesses’ production activities and supply chains.
In response, the international community pledged to build a new climate regime through the Paris Agreement and to make concerted efforts to limit the global average temperature increase to well below 1.5°C above pre-industrial levels. Countries have set a goal of becoming carbon neutral by 2050 and are putting in place specific policies and institutions to achieve this goal.
Transitioning to a net-zero economy: global policy trends
Carbon neutrality means net-zero carbon dioxide emissions. To achieve this, governments are adopting a variety of policies, including
✅ Introducing and expanding carbon pricing
Carbon pricing is a policy that puts a price on carbon emissions to incentivize companies to reduce their emissions. There are two main types of carbon pricing: “emissions trading schemes” (ETS) and carbon taxes.
- Emissions trading system (ETS): a system where governments allocate carbon emission allowances to companies and allow them to trade any surplus or shortage of allowances on the market. Currently, more than 70 countries and regions, including the European Union (EU), South Korea, China, and the U.S. state of California, have or are considering cap-and-trade programs. The European Union’s Emissions Trading System (EU ETS) has grown to become the world’s largest carbon market since its introduction in 2005, and the price of allowances has increased significantly in recent years, playing an important role in accelerating companies’ carbon reduction efforts. As of June 20, 2025, the price of a carbon credit under the EU ETS is €72.97/tCO₂e, an increase of approximately 0.32% over the past month and an increase of approximately 7.23% year-to-date
- Carbon tax: A system that taxes companies or individuals in proportion to the amount of carbon they emit. Nordic countries such as Sweden and Finland were early adopters of carbon taxes with high tax rates, and Canada and Switzerland are also implementing carbon taxes.
Accelerate the renewable energy transition
The key to carbon neutrality is to reduce reliance on fossil fuels and increase the share of renewable energy. Governments are offering various incentives, including subsidies, tax breaks, and mandatory quotas, to encourage the expansion of solar and wind power. According to the International Energy Agency (IEA), global renewable energy generation reached a record high in 2023, with solar power in particular experiencing explosive growth. According to the May 2024 IEA report, global renewable energy capacity increased by 50% year-on-year to 510 GW in 2023.
✅ Developing and investing in green technologies
Investments and support for the development of innovative technologies that can contribute to reducing greenhouse gas emissions, such as carbon capture, utilization, and storage (CCUS), hydrogen energy, and next-generation batteries, are on the rise. The U.S. is heavily subsidizing the green energy and technology industries through the Inflation Reduction Act (IRA), and the European Union is also actively promoting these industries through its Green Deal industrial initiative.
The new normal: ESG management
The transition to a new climate regime and a carbon-neutral economy requires a new management paradigm for companies. This is environmental, social, and governance (ESG) management. While a company’s financial performance used to be the primary criterion for evaluation, non-financial ESG factors have emerged as key indicators of a company’s sustainability.
- E (Environment) – Environment: Assesses a company’s environmental impact, including climate change response, resource efficiency, pollutant emissions management, and biodiversity conservation. Organizations are strengthening their environmental management by setting targets to reduce carbon emissions, increasing the use of renewable energy, and developing eco-friendly products.
- S (Social) – Social: Assesses a company’s social responsibility and impact, including labor practices, human rights, customer satisfaction, and community contributions. Includes creating safe work environments, promoting diversity and inclusion, and adhering to fair trade practices.
- G (Governance) – Governance: Evaluates a company’s transparent and accountable governance, including board composition, audit systems, protection of shareholder rights, and ethical management. This is essential to a company’s long-term value creation and risk management.
ESG management is increasingly recognized as a business opportunity that goes beyond corporate social responsibility. Companies with strong ESG ratings can attract investment, gain positive consumer perceptions and increase brand value, open up new markets by developing and investing in green technologies, and gain a competitive advantage by proactively responding to increasing regulations.
The rise of new industries: opportunities in the net-zero era
The transition to a net-zero economy is driving the transformation of existing industries and the birth of entirely new ones.
✅ Rapid growth of the renewable energy industry
The renewable energy industry, including solar, wind, and hydrogen fuel cells, is a key driver of the zero-carbon era. With the development of related technologies and increased investment, power generation efficiency is increasing and the cost of power generation is decreasing, making it a major source of energy to replace fossil fuels. In particular, offshore wind power and green hydrogen production technology are promising areas that will lead the future energy market.
✅ Explosive growth of the electric vehicle and battery industry
The electric vehicle and rechargeable battery industry is experiencing explosive growth, driven by policies to expand the adoption of electric vehicles around the world. With more and more automakers announcing plans to discontinue production of internal combustion engine vehicles, the race to develop high-performance and high-efficiency battery technologies is intensifying. The entire industry ecosystem, including battery materials and charging infrastructure, is expanding rapidly.
✅ Carbon capture, utilization, and storage (CCUS) industry
Achieving carbon neutrality requires more than just reducing carbon emissions, it requires technologies that remove or utilize carbon that has already been emitted. CCUS technology captures and stores carbon dioxide from industrial facilities or utilizes it to make new products. While still in its infancy, the technology is recognized as essential to achieving global carbon reduction goals and is attracting significant investment and research and development. Global investment in CCUS projects is estimated to more than double in 2024 compared to 2023.
✅ Green materials and resource recycling industry
As plastic pollution and resource depletion concerns grow, the development of eco-friendly materials and resource recycling industries is gaining importance. Eco-friendly materials such as biodegradable plastics and plant-based materials are replacing conventional materials in various industries, and building a resource circulation economy through waste recycling will be a core competitiveness of future industries.
The journey to a sustainable future
The transition to a new climate regime and a carbon-neutral economy poses a huge challenge for humanity, but it also presents new opportunities. Businesses can no longer focus solely on financial performance, but must also drive sustainable growth through environmentally and socially responsible ESG management. This goes beyond mere regulatory compliance and will lead to the development of innovative technologies and the creation of new business models that will make companies more competitive.
The road to net-zero carbon will not be smooth, but what is clear is that addressing climate change is essential for human survival and prosperity. If businesses, governments, and all individuals work together to drive this change and build a new economic system for a sustainable future, we can overcome the climate crisis and create a more prosperous society. What role does your organization want to play in this massive transformation?
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