Illustrative photo (Photo: dangcongsan.vn)

Hanoi - More small and medium-sized enterprises (SMEs) in Vietnam have integrated environmental, social and governance (ESG) practices into their operations amid the global trend of sustainable development and responsible business.

SMEs now account for over 95% of the total enterprises in Vietnam. They also recruit 51% of the social workforce, contributing more than 40% of GDP and 30% of the total State budget revenue.

Chairman of the Pacific Asia Commercial Dispute Resolution Arbitration Centre Tran Minh Son said many SMEs that paid attention to implementing ESG activities said corporate profits and returns on investment must be viewed in a broader context. That includes socio-economic issues and corporate social responsibility.

These companies said they voluntarily pursue social and environmental concerns from labour and employment practices, environmental issues such as biodiversity, climate change, pollution prevention, fighting bribery and corruption to active participation in community activities, Son said.

CEO of Viet Truong Co. in Hai Phong city Ngo Minh Phuong, said a company can ensure sustainable business performance when it archives business growth and development goals without having a negative influence on social development and the environment.

Integrating ESG practices into their operation could help businesses increase profits, outrank their competition, and affirm their reputation in the business environment, Phuong said.

ESG has become mainstream in Vietnam in recent years, driven by the Vietnamese Government’s strong signal to promote ESG-related practices, especially with a strong commitment to the transition to a carbon-neutral economy by 2050 at the 2021 United Nations Climate Change Conference (COP26), coupled with investors’ growing demand for sustainable development.

According to the report 'From Ambition to Impact' on Vietnam ESG readiness, jointly developed by PwC Vietnam and the Vietnam Institute of Directors, most businesses in Vietnam are just starting on the ESG journey.

Although 80% have made ESG commitments or plan to do so in the next two to four years, there were gaps between ambition and action.

PwC’s report showed that only 66% have some ESG programmes in place, 24% possess a clear governing structure, five% have active board involvement on ESG matters and 28% have strong ESG risk metrics to monitor progress, while 71% lack understanding of data required for reporting and 70% have none or very limited ESG reporting.

Experts said that consumers are increasingly concerned about the environmental and social footprint of the products and services they consume. Meanwhile, investors tend to look for environmental, social and governance criteria when making investment decisions./.