Over the past 30 years corporate governance in South Africa has undergone meaningful transformation, largely guided by the influence of the King Codes. The publication of the draft King V Code on Corporate Governance by the Institute of Directors in South Africa (IoDSA) on 24 February 2025 marks a noteworthy development in this journey, particularly as businesses increasingly prioritise environmental, social, and governance (ESG) and business and human rights (BHR) considerations.
This reformulation of South Africa's governance framework reflects the growing consensus that ESG and BHR are no longer peripheral, but central to long-term corporate success and sustainability. However, as with previous versions, the draft King V Code has drawn both support and critique regarding its practical effectiveness and relevance.
Embedding ESG and BHR in Governance Principles
King V brings a sharper focus to impact-driven governance. Among its key innovations is the integration of concepts such as "impact," "impact materiality," "Ubuntu," and updated interpretations of "sustainability" and "value creation." These additions are intended to strengthen the alignment of corporate behaviour with ethical leadership and societal accountability.
The emphasis on impact materiality signals a dual lens through which businesses must operate, considering both how external factors influence their performance and how their actions affect the communities and environments in which they operate. The formal introduction of Ubuntu brings a distinctly South African ethos into the governance conversation, promoting human dignity, interconnectedness, and ethical accountability as guiding principles.
Moreover, the modernised understanding of sustainability and value creation encourages businesses to move beyond financial performance, measuring success also by their contributions to broader socio-economic and environmental objectives.
Structural Improvements and Conceptual Shifts
King V proposes a more accessible and streamlined framework:
- reduced number of principles: from 17 in King IV to 12, improving clarity and usability;
- single-document format: eliminating the complexity of fragmented guidance; and
- proportional governance: emphasising that governance should be tailored to an organisation's nature, size and complexity.
The draft Code also includes a formal glossary of terms to enhance consistency and understanding, especially regarding ESG and BHR-related concepts.
King V continues to build on the "apply and explain" approach introduced in King IV, which requires organisations to articulate how they apply governance principles in practice, rather than simply ticking compliance boxes. Whether these explanations will be expected to demonstrate genuine substance remains a topic for debate.
Integrated Thinking as a Unifying Theme
An executive summary accompanying the draft Code emphasises integrated thinking as a foundational theme. It suggests that organisations must view themselves as interconnected with, and dependent upon, the broader economic, social, and environmental systems in which they operate.
This approach is designed to influence all areas of governance, including:
- strategy and performance;
- ethical leadership and corporate citizenship;
- composition of governing bodies;
- risk, compliance, and assurance; and
- stakeholder relationships and reporting
By weaving ESG and BHR into every aspect of corporate governance, the Code aims to make sustainability an operational imperative rather than an optional extra.
Implications for Business
The direction King V takes mirrors global trends that expect companies to adopt a multi-stakeholder approach and to demonstrate accountability beyond shareholder returns. South African businesses are now called to embed sustainability within their strategy, risk management, and daily operations.
The inclusion of Ubuntu further reinforces the need to align governance with South Africa's cultural values – highlighting respect, collaboration, and social responsibility. Value creation is redefined as a holistic objective, encompassing financial, social, and environmental outcomes.
However, operationalising ESG and BHR objectives will not be without challenges. Balancing commercial performance with expanded ethical and sustainability responsibilities may test existing business models. Furthermore, clarity will be needed on how these expectations are to be enforced or measured in practice.
Why King V Matters
While not without its critics, some argue that the King Codes risk becoming symbolic rather than transformative. The draft King V Code offers a timely opportunity to reshape corporate governance in a way that is both globally competitive and locally relevant.
Its goal is to support South African companies in adapting to fast-evolving governance landscapes by:
- encouraging long-term value creation;
- promoting responsible and ethical leadership; and
- ensuring governance practices are future-fit.
The inclusion of ESG and BHR considerations as central pillars reflects a commitment to modern governance ideals, ensuring that businesses contribute meaningfully to society while building resilience and trust with stakeholders.
King V represents more than just a revision of principles, it reflects a paradigm shift towards inclusive, impact-oriented, and ethical corporate governance. For South African businesses, embracing this shift is not just about regulatory compliance, but about securing long-term relevance, reputation and resilience in an interconnected world.
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