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In the context of globalization, ESG has become an indispensable part of business strategy for investment funds and businesses around the world .

Memorandum of Understanding signing ceremony between VinaCapital and Industrial Bank of Korea

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It can be seen that ESG is an important factor that cannot be ignored by Vietnamese enterprises when they want to sell to international partners. Practicing ESG will help Vietnamese enterprises improve their competitiveness, expand their markets, and create sustainable values for society and the environment.
To effectively practice ESG, Vietnamese businesses need to have leadership commitment, appropriate resources and knowledge, support from government agencies and non- governmental organizations, and transparency and regular audits. Only then can ESG become a smart and winning business strategy for Vietnamese businesses.
Vu Chi Cong - ESG Director, VinaCapital Group

PRI - the Responsible Investment Initiative, promoted by the United Nations in 2005, has attracted nearly 4,000 members by the end of 2021. These members are investment funds and financial institutions with a total capital under management of more than 121 trillion USD. That means, all of these investment funds have been applying ESG assessment criteria to their decision-making process to some extent. And this rate will continue to increase.

ESG not only helps businesses attract investment, but also helps them expand export markets and create new business opportunities with international partners. ESG criteria are especially important when dealing with developed markets, where these standards are considered the minimum standard for participating in global supply chains. Principles and policies on responsible investment, traceability and sustainable procurement are increasingly important to our partners and customers.

Some typical examples are the European Anti-Deforestation Regulation (EUDR) which requires consumer goods to undergo a rigorous anti-deforestation assessment process before entering the markets of European Union countries. Some of our key export industries such as coffee, cocoa, rubber and wooden furniture will be greatly affected by this regulation. Or the Regulatory Mechanism

The European Union’s Cross Border Carbon Assessment (CBAM) will impose a carbon tax on imports into the EU market. This means that if our businesses are proactive and act early to adapt, it will create a huge competitive advantage. If not, we will be left behind in the upcoming global competition.

In 2022, IMF statistics show that Vietnam's total GDP is 413.8 billion USD. Meanwhile, according to the General Department of Customs, Vietnam's total export value of goods in the same year reached 371.3 billion USD and according to statistics from the State Bank, the total registered FDI capital in Vietnam reached nearly 27.7 billion USD. The above figures show that the dependence of the Vietnamese economy on FDI capital and revenue from international trade is very large. Thus, it can be seen that for Vietnamese enterprises, early application of ESG principles not only brings sustainability benefits but is also an important factor in attracting investment and exporting goods. Enterprises with good ESG practices and reports will have more benefits in accessing capital sources and outputs for their products. In addition, the good practice of ESG by each enterprise, when becoming a wave, will contribute to making the image of the Vietnamese market more attractive in the eyes of investors and international partners.

ESG is a common trend in the world but is still new in Vietnam, so it is completely understandable that there are still many confusions in approaching and implementing it. However, initiatives on environmental protection, corporate social responsibility, and applying circular economy to reduce, recycle and reuse waste have actually been widely applied by us. For example, more than 10 years ago, agricultural waste was a huge burden in Vietnam, but today, most of it can be used as raw materials to produce biomass pellets or biochar, helping to reduce the need for energy from fossil fuels and become a significant source of income for businesses. Or the extraction of chitosan and gelatin from shrimp and fish shells for application in the cosmetics and pharmaceuticals sectors; organic fabrics from pineapple leaf fibers; leather shoes produced from coffee waste are typical examples showing the opportunities when applying circular economy and opportunities can come from all sectors.

Whether ESG practices help businesses increase profits or not depends on the capacity and practices of the business. For example, for a textile business, production costs from energy consumption for the dyeing process are very large. If the business can optimize the amount of fuel used, it will also save a large amount of production costs. In general, we should not understand ESG as a separate aspect for businesses to add resources to "focus on practice", but ESG is essentially a system of factors that are seamlessly integrated into vision, strategy, orientation, culture and production and business activities.

We should consider ESG practice as a journey for businesses to develop sustainably and sustainably. It is a process of continuous self-assessment and improvement to become better and better. In the process of working with businesses at VinaCapital, it can be seen that each business will have its own characteristics, its own story and therefore the ESG practice journey of each business will also be different. But the approach to systematic assessment and implementation will basically be the same:

First, awareness of the importance of ESG to the business development strategy needs to come from the top leadership. This awareness will then be realized through policies and strategies to integrate ESG into the daily business operations of the business at all levels and departments. The role of the board of directors is always important for any business, especially when there is a need for change. If a business has a good governance system and a board of directors with a long-term vision, there will be appropriate strategies to minimize negative impacts on the environment and improve employee well-being.

Second, businesses need to build a specialized or semi-specialized department to coordinate and monitor their ESG implementation process, and be the contact point between the business and investors and trade partners regarding ESG-related information.

Third, businesses need to conduct internal ESG audits and comprehensive assessments of departments and factories to identify key ESG risks and improvement plans. This will help businesses know where they are, what problems they are facing, and what the roadmap is ahead.

Fourth, businesses need to have a system for recording and storing information related to their ESG practices.

Thus, it can be seen that ESG is an important and indispensable factor for Vietnamese enterprises when they want to sell to international partners. Practicing ESG will help Vietnamese enterprises improve their competitiveness, expand their markets, and create sustainable values for society and the environment. However, to practice ESG effectively, Vietnamese enterprises need to have the commitment of their leaders, have appropriate resources and knowledge, have the support of state agencies and non-governmental organizations, and have transparency and regular audits. Only then can ESG become a smart and winning business strategy for Vietnamese enterprises.

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