Dinh Hoang Giang, director at building material corporation Secoin, said it is exporting adobe bricks to approximately 60 countries. Most partners have strict requirements on the environment and to meet the demand of clients, Secoin has been making great efforts to manufacture environmentally friendly and non-polluting products.

“We have plans to cover facility roofs with solar panel systems to save energy, and apply solutions to prevent greenhouse gas emissions,” Giang said. “ESG (environmental, social, and governance) will be an advantage for export companies, which contributes to fostering competition capacity for their products and could lead to an impact on orders. However, to be honest, we do not fully understand and cannot fully apply related criteria.”

Private businesses admit uphill task to implement ESG

Secoin is one of many businesses and financial institutions in Vietnam that are stepping up their journey in ESG considerations and reinforcing commitments to foster sustainability. The Vietnam ESG Readiness Report from PwC for 2022, which surveyed over 230 private firms in Vietnam this summer, shows significantly upbeat figures about how businesses in Vietnam are approaching these matters.

In particular, 80 per cent of survey participants said their companies have made commitments or plan to do so in the next 2-4 years. Companies yet to make any commitments or plan for ESG cite lack of knowledge as the key barrier. Only 29 per cent of respondents has confidence in their board’s ESG capabilities, while 43 per cent are considering establishing training.

Statistics on small and developing businesses in Vietnam about the key factors motivating their ESG commitment, published by the US Agency for International Development’s (USAID) Improving Private Sector Competitiveness (IPSC) initiative, showed that 83 per cent of businesses implement ESG to improve corporate branding and credibility. Just under half do it to comply with legal regulations, and 23 per cent of surveyed businesses are required to implement ESG by investors or shareholders.

“When we engage with companies to improve their ESG performance, we see that mindset of the top leader plays a very critical role in setting out the company’s strategy and roadmap,” said Nguyen Thi Cat Tuong, head of ESG Research at Dynam Capital. “Therefore, corporate governance comprises the most important of ESG, and that is the reason why we have spent a lot of effort over many years to improve corporate governance practices in Vietnam.”

Although many smaller businesses are aware of the importance of practising ESG, they still face many barriers during the implementation process. “We think it is lack of guidance from the authority, lack of capability, and also lack of budget,” Tuong said.

“In addition, many companies are struggling with losses, and ESG might not be their priority in the short term. However, we anticipate that in the next few years, when there is more enforcement from the government, ESG will become a must-do for any company,” Tuong added.

The IPSC statistics further showed that 70 per cent of surveyed businesses are concerned about lack of knowledge, 60 per cent of participants said that their small scale is their barrier, and half reflected that they lack financial resources.

Acknowledging the trouble of private enterprises, the Ministry of Planning and Investment and USAID are to collaborate to implement an initiative to support legal framework development and instruments for promoting ESG adoption in the private sector.

In particular, by 2025, the initiative is expected to raise awareness for 100,000 small and growing businesses about ESG considerations, as well as implementing support packages for 300 such businesses to meet the sustainability requirements of export markets and develop inclusive and green business models.

The initiative will also sponsor up to $260,000 worth of technical assistance for 10 innovative ESG initiatives to pilot, implement, or scale up sustainable business models.

Guy Williams, a sustainable development expert at Deloitte, said, “The government’s role is critical in creating the environment for these things to flourish, and there is a need for consistency.”

The government can help to control and standardise the issues in terms of mandated or regulated reporting that will help businesses know what to do to access those markets, Williams added. “Besides that, creating incentives and understanding whether they’ve read financial or tax mechanisms are crucial, as the role of banks and financial institutions is also key in terms of the role of government.”