It seems that the majority of Vietnamese enterprises are still focusing on business growth and financial success rather than taking a more appropriate look at Environmental, Social, and Governance (ESG) criteria. However, there are increasing numbers of enterprises that are now aware of the needs and values of applying ESG to their business for sustainability. Certain enterprises are integrating ESG criteria into their business activities, but most are still in the early stages, and enterprises with higher ESG integration will have better financial performance, talent retention, customer loyalty, and long-term value creation.
According to the survey results in Grant Thornton’s International Business Report (IBR), the leading reasons why enterprises in Vietnam in the mid-market are prioritizing sustainability also expresses the roles and benefits of integrating ESG criteria in general, including a desire for business to see a sustainable recovery from Covid-19; improved access to capital and investment in response to the ESG requirements of creditors and investors; political prioritization of sustainability and corporate responsibility; better operational efficiency and lower costs; response to customer or client pressure; and concerns about attracting, motivating, and retaining employees.
There is a strong trend for high-quality FDI to look for developing economies that have sufficient ESG requirements and adoption. Consumers are increasingly asking for products made in countries that take ESG seriously. Therefore, Vietnam will be more competitive in attracting such investment if it can fully prepare and meet these expectations. However, our survey results reveal that Vietnamese enterprises are facing barriers when promoting ESG criteria, such as concerns about the cost of taking action; a lack of clarity around new regulations or requirements; a lack of management time and attention; too much time still being spent on dealing with issues linked to the pandemic; confusion around best measurement frameworks; and a lack of internal knowledge and capability. And the leading barrier making enterprises delay ESG adoption is the cost of taking action.
In order to effectively integrate ESG criteria into the business, the first task enterprises should focus on is determining ESG priorities with associated objectives, time-bound targets, and key performance indicators to evaluate ESG performance. Afterward,ESG priorities need to be embedded into an enterprise’s corporate strategy to stay on track. The second is educating the workforce on the need to embed ESG across all operations. The third is proper tracking of progress and reporting of ESG performance.The fourth is regularly reviewing and updating the ESG strategy to ensure the enterprise remains aligned with business and stakeholder expectations. Incentive policies on tax and related investment to be introduced by the government would also be a good tool to encourage enterprises to apply ESG criteria.