ESG principles gain added focus for Vietnamese groups

ESG principles gain added focus for Vietnamese groups

The growing emphasis on greener and more modern standards is reshaping the competitive landscape for Vietnamese businesses, determining their ability to integrate into global value chains.

Mounting pressure driven by investors, international partners, and increasingly conscious consumers is compelling businesses to demonstrate greater transparency in their environmental, social, and governance (ESG) commitments.

ESG principles gain added focus for Vietnamese groups, Source: freepik.com

Recognising these challenges, an event on pioneering ESG excellence, held on March 6 in Hanoi, brought together key stakeholders to discuss strategies for integrating the criteria into corporate operations.

Organised by the Association of Chartered Certified Accountants (ACCA) and KPMG Vietnam, the event underscored the urgency for Vietnamese businesses to align with global sustainability standards to enhance their competitiveness and drive long-term growth.

Attended by hundreds of industry leaders and specialists, the event reflected the increasing demand for robust ESG implementation within Vietnam’s business community.

A panel discussion on sustainable development collaboration featured leading experts from the Ministry of Agriculture and Environment, ACCA Vietnam, KPMG Vietnam, and Agribank. The discussion provided valuable insights into the practical challenges of ESG adoption, highlighting the evolving regulatory landscape and its implications for businesses.

As heard at the event, one of the primary motivations for businesses to adopt ESG practices lies in the shifting legal frameworks both domestically and internationally. New regulations introduce stricter compliance requirements and directly impact a company’s market access and competitiveness.

For example, in 2024, Europe introduced a series of mandatory sustainability standards, most notably the Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive. Following this trend, the UK plans to implement sustainability disclosure requirements by next year, aiming to enhance transparency and corporate environmental accountability.

As a key trading partner of Vietnam, Europe now requires businesses to report greenhouse gas emissions across their entire value chain. This adds pressure on foreign-invested enterprises in Vietnam and businesses trading with Europe and the United Kingdom.

Speaking at the event, Assoc. Prof. Dr. Nguyen Dinh Tho, vice president at the Institute of Strategy and Policy under the Ministry of Agriculture and Environment, warned that businesses failing to integrate sustainability into their core strategies risk severe competitive disadvantages.

Tho pointed to Vietnam’s garment and textile industry as a cautionary example, recalling how the country lost many textile orders to Bangladesh in previous years due to its inability to meet sustainability reporting requirements.

Similarly, Dr. Nguyen Thi Thu Ha, deputy head of ESG at Agribank, emphasised that adoption is not merely a compliance obligation but a strategic advantage.

Businesses that prioritise sustainability benefit from enhanced risk management, improved credit ratings, and optimised capital costs, Ha noted. Major credit rating agencies such as Moody’s and Fitch Ratings have incorporated ESG criteria into their corporate evaluations, directly influencing a company’s access to both financing and its broader market reputation.

However, she acknowledged that despite Agribank’s strong commitment to ESG, practical implementation remains challenging. One of the most pressing obstacles is the absence of a well-defined legal framework for green financing, making it difficult to categorise sustainable projects with clear investment criteria.

Acknowledging the difficulties businesses face in integrating ESG, Pham Hoang Ngoc Linh, partner at KPMG Vietnam, stressed the importance of professional consultancy and auditing support.

According to Linh, aligning with ESG standards is no longer solely a matter of investor or regulatory compliance but a means for businesses to optimise operational efficiency, mitigate risks, and secure access to green financing. However, successful ESG integration requires a fundamental transformation across all levels of corporate strategy, from governance to internal reporting systems.

KPMG has committed $4 billion towards developing sustainability tools, services, and talent to help companies navigate increasingly complex ESG standards.

To bridge this skills gap, various professional organisations have introduced specialised training initiatives. Among the most notable is the Professional Diploma in Sustainability, launched by ACCA in 2024 to equip global professionals with in-depth knowledge of international sustainability regulations and best practices. The qualification covers key aspects of ESG governance, sustainable strategy implementation, and sustainability reporting, as well as assurance and audit processes.

By providing structured education and practical training, To Quoc Hung, country manager of ACCA Vietnam noted that initiatives like the diploma aim to empower businesses with the expertise needed to meet evolving ESG demands, ensuring that Vietnam remains competitive in the global sustainability landscape.

Assoc. Prof. Dr. Nguyen Dinh Tho vice president, Institute of Strategy and Policy, Ministry of Agriculture and Environment In the context of international integration and growing pressure from global environmental standards, Vietnamese businesses can no longer afford to remain outside the trend of sustainable development. Compliance with environmental regulations is not just a responsibility but a prerequisite for maintaining competitiveness. The government has introduced several policies to support businesses in adapting. From this month, approximately 2,100 enterprises will be required to conduct emissions inventories and reporting. Failure to comply could result in fines of up to $4.000. However, many businesses remain unprepared due to a lack of information or insufficient guidance from regulatory authorities. Beyond domestic pressures, international standards such as the EU’s Carbon Border Adjustment Mechanism for the steel and chemical industries present further challenges for exporters. If businesses fail to adapt in time, compliance costs will increase, undermining their competitiveness. Dr. Nguyen Thi Thu Ha, deputy head, Steering Committee for Environmental, Social, and Governance, Agribank Rather than viewing ESG as a mandatory obligation, businesses should integrate it into their core strategy. Setting clear goals, measuring effectiveness, and managing risks in line with international standards allow companies to adapt proactively to tightening regulations. Green investment funds prioritise ESG-focused businesses, creating market expansion. Technology and digital transformation can optimise operations, reduce waste, and enhance transparency. Companies adopting renewable energy, developing eco-friendly products, or offering green financial services can stay ahead of the sustainability trend. Building an ESG-savvy workforce is also crucial, helping businesses manage risks and foster a culture of sustainability. Transparent reporting strengthens credibility and investor confidence while ensuring strategic oversight. Collaborating with international financial institutions and seeking domestic regulatory support can provide access to preferential funding and government incentives. To Quoc Hung, country manager ACCA Vietnam Awareness and governance mindset are crucial for business transformation and sustainable development. To support this, ACCA has partnered with the Ho Chi Minh Stock Exchange and universities to conduct in-depth research, analysing data from high-growth enterprises. These studies help identify key factors for successfully adopting governance standards and ESG strategies. Beyond strategic challenges, personnel remain a major barrier to ESG adoption. To address this, ACCA launched an advanced sustainability certification programme in 180 countries in 2024. Covering governance principles, legal regulations, and sustainable reporting, it equips businesses and professionals to meet stringent standards. With strong collaboration between regulators, professional bodies, and universities, Vietnamese businesses now have greater access to sustainable development models. These efforts enhance competitiveness and contribute to a greener economy, ensuring long-term growth. Pham Hoang Ngoc Linh, partner KPMG Vietnam Businesses today face multiple pressures - not only from macroeconomic conditions and policies but also from the community, employees, and consumers. Employees now seek purpose in their work, choosing companies that align with their values and contribute positively to society. Likewise, consumers are increasingly selective, favouring brands committed to sustainability. This presents a valuable opportunity: the chance to create a greener, more sustainable planet. When businesses, employees, and consumers unite in this mission, everyone benefits. This is not just a trend but a necessity for long-term success. Beyond opportunities, brand reputation is key, and companies that embrace sustainable practices and contribute to society strengthen their credibility and gain a competitive edge. Finally, resilience is crucial. The recent pandemic exposed differences in how businesses adapted. Those with strong preparation, strategic flexibility, and a commitment to sustainability proved more capable of withstanding disruptions.

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