Many businesses have strongly moved towards green, sustainable production. Photo: P.U

64% of businesses are not prepared for green transformation

According to the report “Readiness and difficulties of enterprises in green transformation” recently announced by the Private Economic Development Research Board (Board IV of the Prime Minister's Advisory Council for Administrative Procedure Reform) at the end of September, there are three biggest difficulties that Vietnamese enterprises are facing in the green transformation process: capital, technical personnel and technical solutions to carry out the transformation.

This shows that more drastic solutions are needed from many sides so that Vietnamese goods can confidently penetrate the market.

The report results are based on a survey of more than 2,700 enterprises, roundtable discussions with the participation of leaders of nearly 50 associations and leading enterprises in domestic production and business chains; field visits to a number of factories; consultations with international organizations and domestic and foreign experts.

In fact, green transformation is becoming a “race” at the global level. Major countries have been devoting a lot of resources and designing many legal and practical frameworks to promote green transformation at home as well as creating impacts on other countries.

Vietnam’s major markets are all stepping up the implementation of the Net-Zero commitment, therefore, many new policies have been issued and are expected to be issued, all aiming to create technical barriers for green, sustainable development and reducing greenhouse gas emissions.

Vietnam has also made strong commitments from the Government level and made an international mark on this issue. However, the readiness level of Vietnamese enterprises is not high.

“With policy developments from major markets such as Europe, the US and domestic legislation in Vietnam, businesses seem to be unprepared and will create huge pressure in the future when the regulations expire and move into the mandatory compliance phase,” the report said.

The survey results also show that businesses face many difficulties in green transformation, from information, capital, specialized personnel, etc. Green transformation requires large capital needs for Vietnam in all three regions.

Need to act now to keep up with demand

According to the World Bank's 2022 estimate, the additional financial need for Vietnam to build resilience and reduce greenhouse gas emissions in the 2022-2040 periods is up to USD 368 billion, of which adaptation accounts for 4.7% of GDP per year and decarbonization accounts for 2.1%.

Of which, financial resources from the private sector account for nearly 50% with USD 184 billion, sources from the public sector are USD 130 billion, along with financial support from outside.

Capital is considered the biggest difficulty that businesses face in the process of reducing emissions and green transformation. 50% of surveyed businesses said they faced difficulties with capital and only 5.9% said they had no difficulties with capital.

This is an issue that needs special attention because while businesses are in great need of capital for reducing emissions and green transformation to take advantage of opportunities, green finance has not developed accordingly.

After more than 10 years, green finance has been deployed in Vietnam but the scale is still small, green credit accounts for only 4.5% of total outstanding loans (data from the State Bank as of the end of 2023), while green bonds are still very few

As of December 31, 2023, only 47 credit institutions had green credit outstanding balances of nearly VND 621 trillion, an increase of 24% compared to the same period in 2022, accounting for about 4.5% of the total outstanding balance of the entire economy.

Green credit is currently mainly focused on renewable energy, clean energy (nearly 45%) and green agriculture (nearly 30%).

The implementation of green credit still has many obstacles such as the lack of a legal framework and overall policies while the lending sources of credit institutions are often short-term and medium-term mobilized capital and borrowers require preferential interest rates.

From policy movements and international experience as well as practical business assessments, Board VI believes that Vietnam needs to act immediately to catch up with the requirements and trends from major markets and trading partners.

The Government needs to comprehensively improve institutions and policies to support green transformation businesses, including: reviewing existing policies and legal regulations to match the transformation trend, in line with the recycling and circular economic model...

Green classification standards, green project portfolios, green credit/bond regulations, medium and long-term capital flow designs... need to be issued soon and guidelines for implementation and deployment should be provided quickly so that businesses can access the necessary and appropriate capital sources.

Compared to many countries in the region, the establishment of a carbon credit market in Vietnam is showing signs of being behind in some aspects and requires the relevant ministries and sectors to promote it in accordance with the Government's direction.

The carbon credit market is considered an important piece for businesses and countries to make a green transition.

In addition, Vietnam needs to quickly promote capacity building programs and policies to support a series of pioneering enterprises to adapt to the new game, especially focusing on issues such as green finance, human resources with technical expertise, carbon credit market, technology and energy conversion, etc.