ESG compliance for enterprises

Today, ESG strategies, or sustainable development in general, are no longer just a trend but the “rule” governing the future of the economy. Vietnam is also transforming and becoming one of the leading countries in the region in practicing sustainable standards. Faced with these changes, where should businesses new to ESG begin? What strategies should they apply to optimize their limited resources?

1. The Current State of ESG in Vietnam

What is ESG? It is a set of standards developed based on three core pillars: E – Environmental, S – Social, and G – Governance, aimed at assessing the level of sustainable development practices of businesses. Based on ESG, businesses have a foundation to persuade investors to invest, build their image in the market, and attract high-quality human resources.

According to UOB’s 2023 Asian Market Outlook report, Vietnam and Thailand are the two leading economies in implementing sustainable development practices (ESG). Beyond awareness, businesses have planned and taken action. Furthermore, 94% of Vietnamese businesses surveyed believe ESG is important and a key focus for them in the future.

With a vision for 2050, Vietnam aims to become not only a world leader in agriculture but also a modern, efficient, and environmentally friendly processing industry. The government has issued numerous policies to support domestic businesses in developing sustainably. From capital subsidies to preferential loans, these demonstrate the government’s willingness to work together to transform the economy and keep pace with the world.

Corporate sustainability reporting

However, to reach this bright vision of a green economy, businesses practicing ESG in Vietnam face many obstacles. The shift towards a sustainable approach, which often leads to increased product/service prices, can easily alienate customers and reduce profits. Even more serious is the lack of knowledge among management, resulting in the application of ESG strategies that don’t match internal capabilities.

2. Four Practical Strategies for Businesses Pursuing ESG Sustainability

Because the importance of ESG lies in its foundation for businesses to build long-term strategies. Therefore, the first step is to define the goals of ESG practice: Is ESG a means to attract investment? Will ESG help improve operational efficiency? Or is ESG a core value that your business wholeheartedly strives for in order to provide quality products/services?

After defining the goals, businesses are divided into 4 groups: starters, practitioners, strategies, and leaders. Specifically, the strategies for each group are as follows:

2.1. Starter Group

Current Situation: These are businesses that are just beginning to practice and have never disclosed financial data according to ESG standards. The main goal of this group of businesses is to present financial data according to ESG standards to convince investors and increase brand loyalty.

Strategic Orientation: Businesses focus on increasing profits to maximize financial benefits for stakeholders. Simultaneously, the basic components of ESG must be fully complied with. Profit and investment opportunities are the goals of businesses in the startup group. They only go as far as practicing financial transparency, while their production and operational processes are not fully compatible with ESG criteria.

For the startup group’s strategy, operational activities are not significantly affected, but in essence, they are not sustainable businesses. New businesses with limited resources can start with this orientation and gradually transform further as they attract investors.

ESG governance Vietnam

2.2. The Practicing Group

Current Situation: Businesses have conducted and published financial statements, but the implementation methods are not highly effective. Although aware that ESG will impact business performance, the internal team still does not fully understand the nature of this standard. Therefore, reports often lack direction, with overlapping indicators, failing to highlight the inherent financial capabilities.
Strategic Direction:

  • Establish an ESG Practice Monitoring Unit: This unit supports the direction of business operations in accordance with ESG standards, including operations and financial reporting.
  • Develop a business strategy that harmonizes profit objectives with ESG standards: Businesses in the ESG practice group also depend on the requirements of investors and stakeholders. Therefore, the business strategy needs to balance profit levels.

2.3. Strategic Team

Current Situation: The leadership of this team is experienced and has moved to deeper steps in the ESG implementation roadmap. However, only senior management understands the true meaning of sustainable development, while the remaining departments are primarily focused on execution.

Strategic Direction: All business activities align with the ESG standards.

  • Establish an ESG Quality Management Team: The company needs a leadership team to guide ESG practices, monitor, and propose further sustainable development methods to maximize the company’s potential.
  • Organize internal and public communication activities: All departments and the public need to understand the company’s development direction. This will motivate internal staff to implement the leadership’s strategy, and consumers will have more reasons to support the company.

2.4. The Leading Group

Current Situation: ESG is the most important goal for the leading group, and profit benefits will come second. Businesses have mastered and continuously updated themselves according to the adjustments and improvements of ESG.

Contact S4B Vietnam to discuss the support your business needs for ESG reporting, sustainability reporting and corporate administration in Vietnam.

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S4B Vietnam

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  • Tel: +84 24 3974 4181
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