Navigating the ESG Landscape in Vietnam: Insights from Industry Leaders
The topic of Environmental, Social, and Governance (ESG) standards is becoming increasingly vital in the global business landscape, especially in Vietnam, where a concerted effort is underway to integrate these principles into corporate operations. A recent discussion featuring key industry figures has shed light on the current state of ESG awareness, challenges faced by businesses, and actionable steps for future progress.
Awareness and Understanding of ESG Standards
Bui Thu Thuy, Deputy Director General of the Agency for Enterprise Development under the Ministry of Planning and Investment (MPI), highlighted that while up to 90% of businesses in Vietnam have some awareness of ESG, many struggle to implement it effectively. The MPI recognizes the importance of specific guidance to help businesses achieve their environmental goals, including the ambitious target of reaching net-zero emissions by 2050.
Thuy emphasized that governance remains a significant challenge for many Vietnamese enterprises, particularly smaller companies where employees often juggle multiple roles. This fragmentation makes enhancing governance practices more complex but crucial for enabling broader ESG compliance.
Transitioning to Electric Vehicles: A Case Study
Nguyen Van Dinh, Chairman and Director of International En Vang (IEV), provided a compelling example of a company’s transition to sustainable practices. After over 20 years in the transportation sector, IEV has committed to converting its fleet from petrol to electric vehicles (EVs). Despite the challenges of an underdeveloped EV infrastructure in Vietnam, there’s optimism surrounding this shift. IEV plans to cease investments in petrol vehicles by 2024 and partner with VinFast to broaden access to electric mobility.
This transition is not without hurdles, particularly regarding the existing fleet of petrol vehicles. Nevertheless, the move towards EVs not only aligns with environmental goals but also promises cost savings in operations. IEV’s experience highlights both the economic rationale and the urgency for businesses to adapt to greener practices to combat environmental pollution.
Regulatory and Strategic Frameworks
Nguyen Dinh Tho, General Director of the Institute of Strategy and Policy on Natural Resources and Environment, underscored Vietnam’s commitment to international environmental standards. He noted that compliance with ESG will soon become a necessity for survival, urging businesses to proactively engage with these regulations. Tho believes that, just as previous regulations such as those on bike helmets or alcohol checks have been instituted, ESG compliance is essential for remaining competitive in the global market.
The government is pushing for regulatory frameworks that provide not only requirements but also support and guidance, enabling businesses to adapt their operations to meet ESG criteria effectively.
Emerging Green Enterprises
Nguyen Van Thanh, Global CEO of Green and Smart Mobility (Xanh SM), shared how the company is navigating Vietnam’s pollution challenges. Xanh SM aims to lead the green transportation sector, boasting a fleet of over 50,000 electric vehicles distributed across 40 provinces, and has successfully reduced CO2 emissions equivalent to the output of 2.6 million trees annually.
Thanh’s experience reflects broader market trends that indicate Vietnamese consumers are gravitating toward environmentally-friendly products. Xanh SM has rapidly established itself in a competitive space, demonstrating how commitment to ESG principles can yield impressive results and customer loyalty.
Financial Accessibility and Green Investments
Nguyen Thi Quynh Nhu, CEO of WBS Solution and System, addressed the financial barriers faced by businesses in accessing green capital. As banks tighten their criteria for green financing, many companies struggle to meet these standards. Nhu advocates for businesses to adopt ESG practices as a foundational strategy, rather than a reactive measure to secure funding.
This proactive approach can foster long-term sustainable growth and position Vietnamese businesses favorably in the global market, particularly as demand for green products and processes increases.
The Role of Government and Policy Support
Nguyen Thi Bich Ngoc, Deputy Minister of Planning and Investment, emphasized the urgent need for green growth as a driving force for economic development in Vietnam. She noted that businesses must align their operations with societal responsibilities and environmental stewardship to thrive in an increasingly competitive landscape.
The MPI is actively working on a National Green Growth Strategy that will facilitate sustainable investment and encourage catalytic initiatives within the business community. By reinforcing these principles, Vietnam aims to create a robust environment conducive to green growth.
Global Trends and Investment Opportunities
Matthew Smith, Head of Research Institute Yuanta Vietnam, highlighted the global trend towards ESG investments. He pointed out the growing allocation of capital to ESG-related assets, which is projected to continue expanding to around $50 trillion by 2030. This influx of capital presents significant opportunities for Vietnamese businesses willing to embrace ESG compliance.
The increasing participation of individual investors in ESG initiatives indicates a broad societal shift towards sustainable practices, further motivating businesses to integrate these principles into their operations.
Closing the Loop: Recycling and Sustainability
Phan Dang Bao, Sustainability Deputy Director at Lam Tran Plastic Recycling, discussed the importance of recycling within the ESG framework. Lam Tran is dedicated to not only reducing plastic waste but also fostering community development and governance through its operations. They face challenges in waste management but aim to create best practices for sustainability in Vietnam.
Kim Tu Anh, Director at the Centre for Economic Information, stressed the need for Vietnamese businesses to adapt to ESG standards as part of their operational philosophy and cultural ethos. He argued that successful integration of these standards can lead to greater long-term business success and societal benefits.
Balancing Growth and Sustainability
Finally, Nguyen Giang Nam, Deputy CEO of BCG Energy, reminded the audience of the growing challenges businesses face regarding sustainable practices amid economic pressures. He stressed the need for substantial investment in renewable energy and the introduction of clear ESG criteria for decision-making across various sectors.
As Vietnam propels forward on its path to sustainability, these insights from industry leaders illuminate the multifaceted efforts needed to integrate ESG practices into the fabric of business operations. By addressing both the challenges and opportunities presented by ESG, the Vietnamese business community is poised for a future that balances economic growth with environmental responsibility.