ESG becoming mandatory criteria for sustainable development of business

May 21, 2024 | 16:47
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Environmental, social, and governance factors are increasingly becoming a prerequisite component in the investment decision-making process of many investors, with an initiative offered by the Ministry of Planning and Investment.

The ministry (MPI) last month announced the 2024 ESG Initiative, marking its second consecutive year. The primary objective is to equip the business sector with the necessary tools to seize emerging opportunities amidst the ongoing green transformation and enhance their competitiveness as they integrate into global supply chains.

ESG becoming mandatory criteria for sustainable development of business

The scheme aims to find three businesses with the best initiatives to receive a technical support package valued up to VND2 billion ($83,000). It aims to stimulate the private business sector to adopt sustainable business and practice an environmental, social, and governance (ESG) assessment framework to measure sustainability factors as well as business impacts on the community.

Underlining the benefits of ESG compliance, Trinh Thi Huong, deputy director of the Agency of Enterprise Development under the MPI, said, “Applying sustainable business models and practising ESG not only helps Vietnamese companies comply with legal regulations on the issue, but also to meet market, partner, and investor criteria. In addition, applying ESG also helps them attract green funding.”

ESG also enables businesses to improve their image, position, and brand in the market, she added. “This is also an opportunity for them to turn compliance responsibilities into new values, create advantages for themselves and contribute to realising the sustainable development goals of the government,” Huong said.

Ha Do, head of Sustainability Consulting at KPMG Vietnam and Cambodia, said that meeting minimum requirements on ESG is becoming a prerequisite to attract foreign investment.

“In the past two years, we have received requests to inspect suppliers regarding responsible sourcing, labour safety, child labour, fair treatment, and gender equality from many multinational corporations. Any Vietnamese supplier that does not meet requirements, especially practising the principles of children’s rights in business, will be eliminated from the supply chain,” Do said.

According to PwC Vietnam, many businesses, especially large enterprises, currently see risks associated with opportunities in the process of practising ESG. PwC statistics on a global scale show that 55 per cent of CEOs are not confident that in the next 10 years, their businesses can survive if they continue to operate in the traditional manner.

Practising ESG and sustainable development is not necessarily just a game for large businesses, but also a response of small- and medium-sized enterprises to changing trends in the market.

Do Huu Nhat Quang, director of GreenViet Green Building Consulting, said, “Practising ESG is considered a long-term investment, not a cost. For example, creating a good working environment and taking good care of employees not only brings businesses benefits in terms of human resource development but also reduces costs of finding and training talented people.”

Practising ESG also creates a significant transformation in the current business situation of businesses. For example, at coated steel manufacturer NS Bluescope Vietnam, installing rooftop solar panels on the garage of its factory helps reduce electricity costs during the production process.

“Many partners intending to cooperate in the long term came to survey the factory and observed our ESG practices. For every 10 customers who visit the factory, half of them have the intention to buy our products. We believe that if businesses show a sense of responsibility and try to implement ESG, good results will come, so don’t be too impatient,” said Vo Minh Nhut, president of NS Bluescope Vietnam.

The RIS.ER 24 conference themed “ESG – Motivations & Breakthroughs” will take place on May 23 at Sheraton Hanoi Hotel, organised by Worldbasesys Co., Ltd in collaboration with Vietnam Investment Review.

The conference will be attended by representatives from various ministries and agencies, as well as trade representatives from Asia and America. It will also include representatives from corporations, businesses, domestic and international investors, and media agencies.

The event promises to provide in-depth and detailed discussions on ESG and the potential of its compliance for attracting green capital and global trade.

RIS.ER24 is a series of ESG and Sustainable Development Stories, consisting of an inaugural seminar in May, three workshops over July-September, and a concluding conference scheduled for November.

The programme highlights will feature the participation of experts from far and wide, aiming to discuss new trends, development, and revenue trajectories of Vietnamese and global businesses. It will address challenges related to operational standards and global trade, and analyse topics such as net-zero, carbon credits, the digital economy, green production, human resources, and fair trade.

The following primary topics will be covered in the seminar series:

- Detailed information about new trends that can stabilise Vietnam and the global economy; the challenges towards Vietnam and global industries; and how automation technology can address these challenges.

- Highlights of the programme will include net-zero analysis, carbon credits, the digital economy, the energy transition, green manufacturing, finance, human resources, and more.

- It will also focus on ESG trends:




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Following the success of the 2023 Vietnam Environmental, Social, and Governance (ESG) Initiative, the Agency for Enterprise Development under the Ministry of Planning and Investment and the United States Agency for International Development (USAID) are co-hosting the 2024 Vietnam ESG Initiative.

Game-changing ESG initiatives expected Game-changing ESG initiatives expected

With the Vietnamese government last week boosting commitments to supporting foreign-invested enterprises, more green business and funding initiatives are expected in the coming months.

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Investment options that integrate environmental, social, and governance assessments remain scarce in Vietnam, yet they are drawing increasing attention from discerning investors.

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ESG poses challenges for Vietnamese businesses in global trade expansion ESG poses challenges for Vietnamese businesses in global trade expansion

According to the Corporate Global Trade Survey Report 2023 published by Reuters, 88 per cent of businesses require annual environmental, social, and governance (ESG) data collection from their suppliers. This poses a new challenge for Vietnamese businesses in the process of global supply chain integration.

By Oanh Nguyen

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