Vietnamese enterprises should focus on sustainable development

Why does sustainability performance matter?

There is a clear link between good environmental, social, and governance performance and the ability of companies to be profitable and survive turbulent times. As our research and global experience show, companies that see beyond the immediate equation of shareholders-management-customer-profit and that consider their business in a broader context of many stakeholders - including society and environment - these companies are better able to spot long term trends ad opportunities, are better able to operate in an increasingly complex and interlinked world and better able to attract top talent and employees and customers.

Never before have international capital markets been so interested in how management responds to issues relating to environmental and societal change. With clear links between good environmental and social performance and long-term profitability, it will be those companies that take the lead in sustainability reporting that are better positioned for greater investment and engagement from international investors.

Your view on the current sustainability reporting in Vietnam?

It is encouraging to see Vietnamese companies beginning to recognize and adopt better practices in their annual reports. For some, this includes reporting on sustainability performance. However, there is still a big gap, not only in Vietnam but in many emerging markets, when it comes to material environmental, social and governance information about company performance. Many investors, including institutional investors, need this information to make informed investment decisions. The lack of sustainability reports is a significant constraint on their ability to analyze and channel capital to sustainable emerging market companies.

How can IFC support companies to improve sustainability performance and sustainability reporting?

IFC is committed to ensuring that the benefits of economic development are shared by those who are poor and vulnerable, and that development takes place in an environmentally, socially and financially sustainable manner. In the private sector context, sustainability is increasingly seen as an opportunity to transform markets, drive innovation, improve business performance, and increase prosperity.

On this premise, our 2012 Sustainability Framework, which includes Policy on Environmental and Social Sustainability, Performance Standards and Access to Information Policy, provides the foundation for us and our partners to help protect people and the environment, promote transparency and accountability, and mitigate environmental, social and governance risks as part of conducting business sustainably.

Perhaps I can give two examples of how we have worked with companies in Vietnam to improve their E&S sustainability. First is to promote the energy efficiency among businesses. Many companies see the inevitable rise of energy prices and are thinking about how they can reduce or be more efficient. Our work is to help businesses of all types to install better and more energy efficient equipment and production processes such as waste heat recovery.

These improvements have a clear environmental benefit in reducing emission. They also have a clear financial benefit in saving operating costs with relatively short capital payback periods.  Many of you will know that we have been worked with the ILO to improve labor condition at garment factories. This has a clear benefit for workers. It also has a clear competitive benefit for factories as our involvement serves as a stamp of approval that allows these factories to access global customers such as Nike and Gap.

IFC is fully committed to seeing the public disclosure of environmental, social, and corporate performance in Vietnam. Last year, IFC, in collaboration with the State Securities Commission of Vietnam launched the Handbook on Sustainability Reporting for listed companies. It acts as a guideline for companies to follow common environmental, social and governance standards, and is a product of our partnership promoting environmental and social reporting among listed companies in the two Vietnamese stock exchanges.

IFC together with ACCA Vietnam has also initiated the Sustainability Reporting Award under the Annual Report Award program organized by the Ho Chi Minh City Stock Exchange. The Sustainability Award is not intended to endorse or reward corporate sustainable performance, but rather to acknowledge exemplary disclosure that places performance in the broader context of sustainability challenges, risks, and opportunities. 

We, in partnership with ACCA Vietnam, will provide technical assistance to the development and promotion of the evaluation criteria and processes for the Sustainability section in the annual reports of listed firms; and at the same time transferring the knowledge and experience in developing the Sustainability reporting criteria, the evaluation process to the Annual Report Award evaluation panel.

In the meantime, we will continue our partnership with the State Securities Commission of Vietnam with an aim to establishing an enabling legal framework to promote and enforce the transparency and environmental, social and governance disclosure among listed companies.

What should the government do to promote this good practice?

It has been agreed by both business and non-business that sustainability reporting will only become common practice if voluntary efforts are complemented by urgent action from policy makers.  Since 2006, a number of emerging market governments and stock exchanges have issued requirements or voluntary guidelines on sustainability reporting. In 2010, South Africa requires all companies listed on the Johannesburg Stock Exchange to begin publishing annual “integrated reports” addressing financial and sustainability performances. Report or Explain is a recommendation that Brazil’s BM&FBOVESPA launched this year at Rio +20 with the objective of easing the access of all stakeholders’ - especially investors and analysts - to information regarding companies’ business and sustainability practices, providing transparency to the market.

The work the stock exchanges of Vietnam have done to introduce sustainability into company reporting is an important step in helping investors identify and benchmark those companies that see their business opportunity that sustainability presents. We look forward to continuing our work with the stock exchanges of Vietnam to support the mainstreaming of sustainability in reporting.