Vietnamese business development and environmental challenges

The United Nations 2030 Agenda with 17 Sustainable Development Goals (SDGs) approved on September 15, 2015 emphasizes the importance of businesses in achieving the 17 SDGs besides the Government and organizations. In order to successfully fulfill Vietnam's strong commitments at the 21st United Nations Climate Change Conference (COP 21) and the 26th (COP 26), business roles are indispensable. Vietnam's national strategies and legal documents on sustainable development, green growth, business environment and national competitiveness also emphasize the roles of the business community. Environmental protection is one of three main pillars (Economic - Environmental - Social) of corporate sustainability in particular and sustainable national development in general.

Vietnam has stable macroeconomic indicators, rapid growth and robust integration with a series of international commitments to the environment, especially in many new-generation free trade agreements (FTAs), including regulations and requirements on the environment for export products of Vietnamese enterprises, according to domestic and foreign economic experts.

However, rapid growth plus incomplete economic structure has also brought challenges for environmental protection, such as overexploitation and overuse of natural resources; increasing demands for energy; waste discharge and environmental pollution that reduce environmental quality and weaken impacts on ecosystems and biodiversity. On the other hand, global climate change has created extreme weather patterns and caused many consequences and negative impacts on the production and business activities of enterprises.

Environmental protection at business

Managed and supervised by authorities and supported by domestic and foreign organizations, environmental protection at business has produced positive outcomes in recent years.

Large domestic companies: These are well-organized and operated firms with a vision and mission linked to environmental and social issues. With great financial capacity, they are compliant with legal policies and have programs and initiatives that go beyond compliance, implemented within businesses and in the community. They are examples and models for environmental protection.

Foreign-invested companies: Environmental issues and other related initiatives are usually provided at their global parent firms and subsidiaries in Vietnam, in addition to complying with environmental laws and policies in the host country, and they must also strictly fulfill global policies and regulations from their parent firms. With these global commitments, it is certain that a majority of foreign-invested companies are good at environmental protection.

Domestic export manufacturers: Environmental technical barriers and environmentally friendly export products are mandatory in importing countries for products originated from Vietnam in recent years. To meet these requirements and regulations, Vietnamese exporters have been gradually fulfilling traceability of goods, obtaining certificates of environmental protection and performing voluntary environmental audits. They usually have good environmental protection.

For the rest, including micro, small and medium-sized enterprises (MSMEs): Their compliance with legal policies on environmental protection in business is supervised and administered by relevant authorities.

However, besides positive aspects and outcomes, environmental protection by business has still revealed some limitations: Rapidly growing number of corporate incorporations, high degree of urbanization and industrialization have resulted in excessive, wasteful and uncontrolled production and use of natural resources that spoil ecosystems and biodiversity, generate many sources of increasing pollution, waste and emissions by composition and volume; some companies focus on immediate economic benefits rather than really paying attention to environmental protection, while environmental issues are one of the important pillars of sustainable development at business; environmental protection is just a superficial act of compliance to outsiders; and the use of obsolete manufacturing technology produces bad effects on the environment.

In addition, many serious environmental incidents due to non-compliance or intentional non-compliance at businesses have occurred. This causes adverse impacts on the environment, security, order and society, and takes a lot of time and resources to overcome. Climate response, resilience and adaptation of enterprises remain weak. Environmentally friendly business models and products have not been widely disseminated.

Support solutions for good environmental protection at business

Therefore, supporting enterprises to have good environmental protection needs to be done in a transparent and consistent manner from central to local levels by stakeholders and from enterprises’ own commitments. To do this, it is necessary to take the following actions in the coming time:

First, improving policies and laws on environmental protection in accordance with Vietnam’s context and the world’s trends: The Government plays a constructive role for enterprises in environmental protection coupled with business activity;

Second, raising awareness about environmental protection: Developing target programs on environmental protection to engage stakeholders, including representative associations and organizations of enterprises, to connect the Government, international organizations and other stakeholders to have methodical in-depth communications to enterprises. Raising business awareness of natural capital at business and applying principles of circular economy, large domestic and foreign companies also need to join hands to spread and scale up good models in environmental protection;

Third, building capacity for enterprises: Coordinating professional social organizations, partners, sponsors and innovative enterprises to develop training programs on environmental protection, benefits, and new opportunities for enterprises and helping enterprises to make sustainability reports;

Fourth, enhancing financial support and access to green capital: The Government creates a favorable mechanism for businesses with domestic and international green financial needs to change technology and business practices friendly to the environment;

Fifth, disclosing environmental information: In addition to environmental reporting to competent authorities, enterprises need to make sustainability reporting (or environmental and social reporting, non-financial reporting) for the sake of transparency, and environmental performance accountability to stakeholders, investors and potential partners. Benefits of sustainability reporting have been demonstrated over the years, globally and domestically;

Sixth, supporting and inspiring enterprises to apply the Corporate Sustainability Index (CSI), joining the Annual Program for Benchmarking and Announcing Sustainable Businesses in Vietnam organized by VCCI. CSI was developed by VCCI with friendly, understandable, and easy-to-apply criteria, suitable for the development context of Vietnamese enterprises. This is also an effective tool for them to achieve sustainable development and conduct sustainability reporting. Enterprises that perform well in environmental content in CSI Index not only meet regulatory compliance with environmental protection in the country, but also easily meet relevant international environmental requirements.

Nguyen Quang Vinh

Executive Vice President,

Vietnam Chamber of Commerce and Industry (VCCI)