What is ESG The importance of enterprise ESG in sustainable development

What is the ESG? Learn the role, benefits and trends of ESG in helping Vietnamese businesses develop sustainably, attract investment and enhance brand reputation.

In the global context of sustainable development, ESG (Environmental — Social — Governance) is considered an important set of standards for evaluating a business. If in the past financial profitability was the leading measure, now investors, customers and partners are increasingly focusing on the impact that businesses make on the environment, society and governance. The application of corporate ESG not only enhances credibility and attracts international capital, but also helps to ensure long-term development, safety and transparency.

1. What does ESG mean?

1.1 Concepts

ESG stands for Environmental — Social — Governance. It is an international set of standards for assessing the sustainability and transparency of enterprises.

1.2 The three main pillars

- Environmental: Measures how businesses reduce greenhouse gas emissions, save energy, use recycled materials, and protect resources.

- Social: evaluation of responsibility to workers, diversity and equity in the work environment, as well as the impact on the community.

- Governance: shows the degree of transparency in financial reporting, fair governance mechanisms, anti-corruption and compliance with the law.

1.3 ESG and CSR

ESG is often confused with CSR (Corporate Social Responsibility). However, CSR is voluntary and image-oriented, while corporate ESG is a quantitative standard, with specific reports for investors and international organizations to evaluate.

2. The Importance of Enterprise ESG

2.1 Attracting investment capital

According to Bloomberg, the size of global assets tied to ESG is expected to reach $53 trillion by 2025, accounting for more than a third of total investment assets. Businesses with low ESG scores have almost no access to international investment funds.

2.2 Increase brand reputation

Nielsen's survey found that 66 percent of consumers are willing to spend more on products that come from companies with a clear ESG strategy. ESG becomes a “trust certificate” to conquer the market.

2.3 Risk management

Businesses that do not focus on ESG are susceptible to risks from carbon taxes, international labor regulations or boycott movements because of environmental pollution.

2.4 Sustainable development

Rather than trading the environment and society for short-term profit, enterprise ESG helps optimize costs, improve management efficiency, and sustain long-term growth.

3. Corporate ESG in Vietnam

3.1 Status

Vietnam is deeply integrated into the global supply chain, particularly in textiles, electronics and agricultural products. Partners from the US, EU and Japan all require Vietnamese enterprises to meet ESG standards to be able to sign long-term contracts.

3.2 Pioneering Enterprise

- Vinamilk publishes GRI ESG report, and deploys solar energy in factories.

- Thaco invests in waste treatment systems, saving water and reducing emissions.

- Vietcombank applies green credit, encourages customers to develop environmentally friendly projects.

3.3 Challenges with SMEs

The majority of SMEs in Vietnam have difficulty applying ESG due to capital, human resources and lack of specific guidance standards.

4. Benefits of applying ESG

4.1 Improving Competitiveness

Participating in the global supply chain almost obliges businesses to have a clear ESG strategy, especially when exporting to demanding markets such as the EU.

4.2 Financial efficiency

According to Harvard Business School research, companies with high ESG scores can reduce their cost of capital by up to 20 percent compared to non-performing companies.

4.3 Attracting talent

The younger generation of workers, especially Gen Z, sees ESG as an important criterion when choosing a workplace. Businesses with good ESG make it easy to retain high-quality employees.

4.4 Long-Term Brand Value

ESG-focused businesses often receive positive attention from the press and the community, creating a brand advantage that is difficult to copy.

5. Challenges of implementing ESG

5.1 Initial investment costs

The adoption of ESG requires technological transformation, management and personnel training, which makes many businesses hesitate.

5.2 Lack of standardization

In Vietnam, there is currently no unified ESG framework, leading to confusion in setting up ESG reporttransparency and comparison.

5.3 Lack of professional personnel

ESG needs multidisciplinary knowledge: environmental, social, financial, governance. This is a scarce human resource in Vietnam.

5.4 Greenwashing

Many companies promote ESG to beautify the image but do not actually implement it. This can cause a crisis of trust if detected.

6. Future ESG Trends

6.1 In the world

According to the World Economic Forum, by 2030, more than 70% of global listed companies will have to publish ESG reports periodically.

6.2 In Vietnam

The State Securities Commission has asked listed businesses to prepare a roadmap for ESG reporting. It is expected that in the next 5 years, ESG will become a mandatory requirement for large enterprises.

6.3 Industry Trends

- The textile, energy, chemical industries will be subject to the strictest ESG supervision.

- SMEs will receive capital and technical support to meet ESG standards.

- Products and services labeled “ESG-friendly” will become increasingly popular.

7. Conclusion

Corporate ESG has become the global standard, helping businesses not only grow financially but also make a positive contribution to society and the environment. In the near future, the adoption of the ESG strategy will no longer be an option, but a mandatory requirement if a business wants to enter the international market.

For Vietnamese enterprises, starting to develop ESG reports and implement them step by step now is a way to increase competitiveness, attract investment and develop sustainably in the new era.

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