Decoding the ESG journey: Turning pressure into competitive advantage

(HTV) - In the context of the global move towards sustainable development, ESG (Environmental, Social and Governance) criteria are no longer an option but have become an essential requirement for all businesses.

Currently, the trend of sustainable development and ESG is under pressure from many sides. First, there is pressure from national policies and international standards, forcing businesses to comply. Second, there is pressure from stakeholders. Investors now not only look at economic efficiency but also consider environmental and social factors. Partners in the supply chain, especially in a large exporting country like Vietnam, also have similar requirements. Third, the community around the factory will be concerned about labor issues and pollution levels during operation. Finally, there is pressure from consumers, especially Gen Z. According to recent surveys, about 70% of consumers are interested in businesses that operate ethically, have sustainable strategies and provide environmentally friendly products. All of these factors are creating pressure, pushing businesses to follow the trend of sustainable development.

In terms of awareness, this number is increasing, possibly up to 70%. However, there is still a large gap between awareness and action. According to the same survey, only 22% of businesses have built a specific roadmap. The big problem here is that awareness of ESG is not really accurate. Many businesses still see this as a coping mechanism to comply with regulations, instead of considering it as a risk management tool and an opportunity to create a competitive advantage to develop business.

When it comes to barriers for SMEs, although issues such as finance, human resources, expertise or digital transformation are often mentioned, the biggest barrier actually lies in awareness. It is the lack of accurate awareness that leads to a lack of commitment from the leadership to take the first steps in implementing ESG.

To raise awareness and implement properly, businesses need to start by meeting the requirements of the market, from the supply chain and customers, and at the same time adhere to international standards. The problem is not that they are not doing it, but that they are doing it in a fragmented way. It is important to integrate these initiatives into an overall business strategy, combined with risk management and initial assessment to build a clear and effective roadmap.

Raising awareness of ESG – an important first step for businesses to build a systematic sustainable development roadmap

To build a systematic ESG strategy, businesses need support from three main pillars. The first is from the Government and the State, through the issuance of policy frameworks, guidelines and financial incentives. Recently, the Vietnamese Government and many banks have strongly promoted increasing access to "green capital" for businesses. The second is support from international organizations such as GIZ, IFC or GRI. These organizations provide international standards, training programs, expertise transfer and even access to capital. They help businesses comply with global standards, access the market and have a scientific basis to assess the current situation, thereby making appropriate decisions. Finally, industry associations play a role in unifying the common voice in the industry. They are both a bridge to contribute policy advice and help build professional standards and specific ESG implementation roadmaps, suitable for each business sector.

Ms. Dang Thi My Linh - Representative of Elfarm Company, said that the biggest challenge for small and medium enterprises (SMEs) is access to policies and capital sources. She shared that through participating in ESG training series, her business has acquired basic knowledge to apply, thereby creating development opportunities, aiming for export activities and the goal of net zero emissions by 2050.

According to Ms. Lam Tran Ai from Viet Label Company, her business is currently facing difficulties in terms of resources, including human resources and machinery systems. Therefore, strengthening management capacity is considered a top priority for the board of directors to be able to access new opportunities. She believes that the orientations from the State will open up development directions and when needed, businesses can contact the Trade Promotion Agency for support.

Ms. Vu Kim Hanh - President of the Association of High-Quality Vietnamese Goods Enterprises, commented that accessing finance for ESG activities is often more difficult than mobilizing capital for normal business. According to her, the reason is because ESG not only requires money but also requires understanding and practical guidance. She also pointed out that reality requires Vietnamese businesses to focus on cultivating knowledge and skills in two often overlooked areas: business law and financial management.

Mr. Nguyen Cong Minh Bao shared about the 5-step framework of Green Transition in orienting the green transformation roadmap for businesses. The first step is "Raising the right awareness through training" The second step is "Compliance", not only with laws, international standards or supply chain requirements, but also integrating into business strategy and risk management. The third step, often overlooked by businesses, is "Building a foundation through initial assessment" to build credibility. The fourth step is "Systematically deploying solutions" after having a solid foundation, helping businesses prioritize effective items. The final step is "Accessing green capital".

Based on this framework, Green Transition’s services include training, reporting support, certification and sustainable development strategy development. Mr. Bao emphasized that the company’s approach is to accompany businesses, fully integrate into business operations instead of just being an outsourced consulting unit, and at the same time take advantage of an ecosystem of industry-leading experts to support businesses at every stage.

Looking ahead, Mr. Bao predicts that in the next 5 to 10 years, ESG will move from a voluntary to a mandatory phase in Vietnam. Pressure will come from many sides: reporting standards will be integrated with international financial standards (IFRS, ESRS); the Net Zero commitment by 2050 will promote carbon markets and greenhouse gas reporting requirements (especially for exports); and green finance will grow strongly, with the State Bank of Vietnam planning to increase the proportion to 25% by 2030.

Every business, regardless of size, can start its ESG journey by leveraging its existing strengths.

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Source: https://htv.com.vn/giai-ma-hanh-trinh-esg-bien-ap-luc-thanh-loi-the-canh-tranh-22225100110582867.htm