ESG: The Foundation for Modern Governance and Sustainable Growth

Q: What is ESG?

Answer : ESG is an abbreviation of 3 words: Environment - Social and Governance.

At the beginning of the 21st century, when countries faced environmental pollution and overexploitation of natural resources, the world required the development of a set of standards to evaluate businesses beyond traditional financial factors. Therefore, in 2004, the United Nations and 20 international financial institutions implemented a global treaty called: UN Global Compact, and simultaneously issued a report called: "Who Cares Wins". This report encourages businesses to integrate environmental, social and governance factors into financial analysis and investment decisions. These are important factors that attract investment in businesses that develop in a sustainable direction.

Factor E - Environment: This is the first factor to consider. This criterion requires businesses to manage waste, save energy, conserve natural resources, and in some places, businesses even need to preserve biodiversity in the area where the factory is located. The "E" criterion helps businesses assess and manage the impact of business activities on the environment and climate change.

S - Social factor: In businesses, the human factor is often difficult to assess specifically, but with ESG, this factor refers to employee satisfaction, the interest of stakeholders, investors and customers in business activities and the business's operating processes towards sustainability. Implementing the "S" factor, businesses must ensure the rights of employees, contribute to social welfare, and demonstrate fairness and transparency for participants. Social also helps improve the quality of life of employees.

G factor - Governance: This is the factor that investors are interested in, because a well-governed enterprise, with transparent information, compliance with the law and business ethics, and a clear risk management strategy will help the enterprise move on the path of sustainable development.

Businesses that apply ESG standards will increase trust from investors, communities and consumers, as well as demonstrate their responsibility and actions to protect the environment. Achieving ESG certification helps businesses access green finance globally.

Question: What obstacles and difficulties are Vietnamese enterprises currently facing in implementing these criteria? How does ESG contribute to sustainable development?

Answer: According to Mr. To Thanh Son, Director of Sustainable Development of SGS Vietnam Certification Organization, businesses in Vietnam currently lack specialized human resources and financial resources dedicated to implementing ESG goals. On the other hand, ESG includes many criteria and standards, so understanding and implementing it is not easy. Although the Government encourages implementation, up to now, the institutions and incentive policies are not specific and clear, so not all businesses dare to invest in implementing ESG goals. This figure is reflected in the report of international auditing and consulting firm PwC in 2022, surveying 234 businesses, 66% of businesses are implementing ESG, 71% of businesses lack understanding of the data needed for reporting.

To overcome financial, human resources and knowledge difficulties, Professor Stefan Phang, Global Expert on Sustainable Development and Creating Shared Value (CSV), recommends: “Vietnamese enterprises need to clearly understand the concepts, criteria and standards of ESG and adjust ESG goals to suit business and sustainable development goals, thereby building a roadmap from short to long term. In particular, enterprises need to improve the understanding of staff and employees about the sustainable benefits of ESG, because this is the local human resource to achieve this goal”. Associations, organizations and the press need to update relevant information so that enterprises can update and learn from experience. To take advantage of the government's financial incentives, enterprises need to adjust their operations to suit the national green growth strategy. And most importantly, persevere with small steps to achieve ESG goals.

International studies have shown that ESG brings many economic and environmental benefits: Enterprises earn 3-4% higher profits than the industry average, reduce carbon emissions by an average of 18% and increase labor productivity by 12% thanks to reduced turnover. In the coming time, developing ESG will realize the mission of private enterprises leading the transformation process in the spirit of Resolution No. 68-NQ/TW, contributing to the sustainable development of Vietnam's economy.

MR. DUC

Source: https://nhandan.vn/esg-nen-tang-cho-quan-tri-hien-dai-va-tang-truong-ben-vung-post883766.html