Dual transition can motivate businesses

How does Vietnam’s dual transition compare to the global landscape?

The world is grappling with three interconnected crises: climate change, environmental pollution, and biodiversity loss. In response, global investors are increasingly focusing on assets that positively impact the environment, aligning with mandatory and voluntary environmental, social, and governance standards.

Amid these international demands for sustainability, Vietnam has committed to its National Green Growth Strategy through 2030, with a vision towards 2050. By 2030, the strategy aims to mitigate land and water resource degradation, secure water supplies for key economic sectors, and transition agricultural practices to climate-smart models.

Global trade and investment trends heavily influence Vietnam, requiring an independent and proactive approach. Since its economic reform in 1986 and World Trade Organization accession in 2006, Vietnam has undertaken significant institutional changes to align with a market-based economy. A new milestone is anticipated in 2026, with reforms focusing on green transition, digital transformation, and sustainable development.

These reforms mirror global trends. Major international companies like Apple, Intel, and IBM have adopted net-zero policies, and Tesla continues to push electric transportation. For example, Apple recently launched its first carbon-neutral computer, using 100 per cent recycled gold and silver alongside clean electricity. This suggests that Vietnam has the potential to produce similar products if industrial zones and investors meet the required standards.

Despite progress, Vietnam faces challenges in aligning fully with global sustainability benchmarks. For instance, new EU regulations taking effect in June 2024 will require companies operating in the EU to report on sustainability.

However, as one of the top 20 greenhouse gas emitters, Vietnam must improve compliance to remain competitive in the global trade and investment arena. Vietnam’s current share of global trade, at 0.8-1 per cent, underscores the importance of sustainable practices to capture larger market opportunities.

Prof. Nguyen Dinh Tho, general director of the Institute of Strategy and Policy on Natural Resources and Environment, under the Ministry of Natural Resources and Environment

What commitments has Vietnam made in international forums?

Vietnam is transitioning from the Fourth Industrial Revolution to the Fifth, often referred to as the Green Revolution. This shift aligns with global efforts to address sustainability amid geopolitical competition.

In 2015, Vietnam committed to reducing emissions by 9 per cent without international support, with the potential to increase this to 27 per cent with assistance. And in 2021, it pledged net-zero emissions by 2050 – ahead of key competitors such as Brazil, India, Indonesia, and Thailand. To meet these commitments, Vietnam revised its second Nationally Determined Contribution (NDC) and pledged a 15.8 per cent reduction in emissions without support and up to 43.5 per cent with international assistance. Vietnam is now preparing its third NDC for 2025 to stay competitive with major emitters such as China and the United States, which have differing roles and responsibilities in sustainability and development.

Achieving net-zero emissions is not just critical for the environment but also an opportunity for Vietnam to restructure its economy, enhance competitiveness, and align with the Paris Agreement’s post-2021 global agenda.

How will Vietnam’s GHG inventory requirements support businesses in the green transition?

By April 2025, Vietnam’s GHG inventory and emissions reporting requirements will expand to cover over 2,100 companies, up from around 1,900. This policy will help establish a carbon credit market where low-emission businesses can sell credits to high-emission companies, facilitating emissions reduction across industries.

However, only about 10 per cent of businesses currently meet the government’s requirements for emissions reporting, highlighting the need for training and capacity-building to support compliance. The government has identified three critical factors for successful emissions reduction and green transition: green finance, green technology, and increased capacity to absorb both. Without all three, businesses may struggle to meet their green transformation goals.

Global funds, adaptation initiatives, and World Bank support are aiding Vietnamese businesses in this transition. For example, carbon pricing mechanisms are being developed to determine the technologies and investments required for a low-emission economy. These mechanisms will play a crucial role in guiding businesses as they navigate this complex process.

Vietnam’s green transformation is deeply tied to its economic future. As global corporations set higher sustainability benchmarks, Vietnam must adapt quickly to remain competitive. Emerging opportunities, such as the ability to produce carbon-neutral goods and engage in international carbon trading, present pathways to bolster its position in global trade.

The journey, however, requires significant effort. Businesses must align with global standards while addressing gaps in tech and capacity, and policymakers will need to accelerate reforms and foster an enabling environment for the transformation.