Building Advantages – Securing the Future with the Vietnam ESG Initiative 2024
On March 21, a significant seminar titled “Building Advantages – Securing the Future with the Vietnam ESG Initiative 2024” emerged from the collaboration between the Department of Enterprise Development of the Ministry of Planning and Investment and the United States Agency for International Development (USAID). This event, rooted in the USAID-funded Project on Strengthening the Competitiveness of the Vietnamese Private Sector (USAID IPSC), serves as a beacon for businesses navigating the evolving landscape of sustainability.
The speakers at the seminar
ESG: The New Business Imperative
The atmosphere at the seminar resonated with urgency as Nguyen Thi Bich Thuy, Deputy Head of the SME Department, articulated the pressing need for businesses to confront climate change—a challenge particularly salient in Vietnam. She pointed out that the global market is increasingly demanding sustainable practices, compelling the Vietnamese government to prioritize sustainable development.
In this changing environment, integrating ESG (Environment, Social, Governance) into business operations is not merely a regulatory response; it presents a unique opportunity for Vietnamese enterprises. Adhering to ESG principles can transform compliance into a significant competitive edge, particularly when engaging with major markets such as the EU and the United States.
The Business Case for ESG
Mark Birnbaum, Director of USAID IPSC, reinforced the notion that the path to green growth is no longer a distant goal but an immediate necessity for businesses today. He criticized traditional metrics based solely on profit, emphasizing that they can no longer define business success. Instead, a holistic approach that balances financial performance with ESG criteria is becoming the new norm.
Hard data supports this shift. According to studies, companies with robust ESG ratings tend to outperform their peers. They enjoy profit-to-equity ratios that are 35% higher and valuations that exceed those without strong ESG commitments by 20%. This emphasis on sustainable practices not only mitigates risks but also enhances resilience against climate impact and resource shortages, thereby solidifying competitive differentiation.
Businesses must integrate ESG practices into their operations
Preparing for Success
Pham Thi Ngoc Thuy, Executive Director of Division IV Office, elaborated on how the implementation of ESG principles can elevate business value. She noted that ESG reporting is a potent tool for identifying potential risks while uncovering opportunities that can shape long-term success.
Moreover, Vietnam’s notable trading partners are advancing regulations that mandate sustainable practices and ESG compliance. For example, companies involved in the EU supply chain will soon face strict environmental standards, known as the E factor, that they must meet within the next two years. Additionally, Germany’s newly instituted supply chain law highlights criteria around labor rights, gender equality, and workplace conditions that constitute the S factor.
Effective corporate governance, which falls under the G factor, remains a cornerstone for increasing core business value. As both domestic and international landscapes evolve, businesses must navigate these compliance requirements or risk facing significant obstacles.
Thuy emphasized the need for businesses to adequately prepare for the journey towards sustainable development. Understanding that ESG compliance is a customized process, she acknowledged that each business will encounter various challenges influenced by its sector and size.
Embracing the New World Order
In this digitally interconnected and environmentally conscious era, businesses that proactively embrace ESG practices stand to gain substantial advantages. Conversely, those that lag behind are at risk of falling short of new industry standards and consumer expectations. “ESG represents both an opportunity and a challenge for businesses,” Ms. Thuy highlighted.
Her motivating words resonated with attendees: “We start from zero, but with determination, we can become heroes.” This powerful message reflects the dynamic spirit of Vietnamese entrepreneurs eager to innovate and adapt in a world increasingly focused on sustainability.
As businesses evolve alongside these growing expectations, the societal and environmental imperatives encapsulated in ESG provide not just guidelines, but also incentives for long-term growth and stability in a rapidly changing global marketplace.