The concept of “system transformation” is gradually being used more and more widely worldwide as a key requirement to recognise sustainable development goals. Transformation means a comprehensive change in reasoning, including renewing and creating new ways of thinking and methods of implementation.

Nguyen Quang Vinh, Vice chairman, Vietnam Chamber of Commerce and Industry

Doing business in the way we used is no longer suitable to achieve sustainable growth and ensure businesses have resilience as well as effective competitiveness. And so, the rest of this decade is a decisive period.

The trend of system transformation has enabled investors, banks, financial institutions, and private investment funds to shift their current and future investment strategies through the concept of ESG instead of traditional financial indicators.

According to VinaCapital Investment Fund, when negotiating investment opportunities in Vietnam, one of the first questions from international organisations on either side is about how the application of ESG standards in Vietnam is being implemented.

In addition, according to Bloomberg Intelligence, it is estimated that total global ESG assets will reach $50 trillion by 2025, equivalent to a third of the total assets under management worldwide. This trend has continued to increase steadily since this number exceeded $35 trillion in 2020. This shows ESG is emerging as a leading trend for investment on a global scale.

According to the 2022 ESG Readiness Report in Vietnam conducted by PwC Vietnam and the Vietnam Institute of Directors covering over 230 businesses, 80 per cent of them have made commitments or are planning to implement ESG practices. This largely comes from the needs of consumers, workers, and investors.

An interesting thing is that when asking of ranking the three ESG factors, 62 per cent of respondents chose governance as the top priority in the implementation, while environmental and social factors ranked next with 22 and 16 per cent, respectively.

The highlight of the governance factor is most likely because they believe that stronger governance will lead to better decision-making in the remaining two aspects. However, prioritising the governance aspect alone is not enough.

In addition, the report also provides some figures which partly demonstrate the challenges for businesses practising ESG in Vietnam. Specifically, up to 71 per cent of respondents lack understanding of the data required for reporting, and only 36 per cent of them use external partners to validate such information. Therefore, to turn these commitments into action, we have to overcome these weaknesses.

Since 2016, the Vietnam Chamber of Commerce and Industry and the Vietnam Business Council for Sustainable Development have proactively promoted these practices in the business community through the introduction of the corporate sustainability index (CSI) and the annual assessment and announcement initiative.

The CSI is updated annually to comply with changes in current domestic legal policies and international regulations. Looking at the CSI, businesses can evaluate their overall health in terms of governance, economy, society, and environment, discover shortcomings that need to be worked on, and find any potential for development that needs to be exploited.

Moreover, the CSI is also an effective support tool for practising sustainable corporate governance, and preparing ESG-integrated sustainable development reports to improve corporate governance capacity, enhance corporate governance capabilities, as well as improve competitiveness and investment attraction in the long term.

We encourage the business community to proactively learn, and apply the CSI in parallel with ESG practices.