by VBF 10/10/2023, 15:43

Businesses Speed up “Green Race”

Being dedicated to sustainable business development for nearly 20 years, I can confidently assert that the Vietnamese business community is undergoing significant changes, encompassing mindset, perception and action. These changes are aimed at fostering sustainable business practices that generate novel values for society. This trend has been further accelerated by the recent COVID-19 pandemic, which has impacted Vietnam and the world at large.

In terms of sustainable development, companies have surpassed the realm of corporate social responsibility (CSR). They have embraced a comprehensive understanding of sustainable development, which entails ensuring economic growth in harmony with environmental preservation and long-term social and security development. Vietnamese companies, particularly industry leaders such as Vingroup, Vinamilk, Bao Viet Holdings, BIDV, PAN Group, SASCO, Traphaco, Garment 10, PNJ and TBS, have spearheaded the adoption of sustainable development practices. Many of these companies are currently members of the Vietnam Business Council for Sustainable Development (VBCSD-VCCI).

These companies are actively fulfilling their robust commitments to sustainable development through various initiatives. These include transitioning to circular production and business models, establishing and reinforcing green and sustainable supply chains, cultivating a diverse, equitable, and inclusive (DE&I) business culture, leveraging renewable energy sources in their operations, strengthening sustainable corporate governance practices, and adhering to the environmental, social and corporate governance (ESG) framework.

One of the most compelling pieces of evidence for the transformation of Vietnamese companies in this “green race” is their active participation in the Program on Benchmarking and Announcing Sustainable Businesses in Vietnam or the Corporate Sustainability Index (CSI). This program has been organized annually since 2016 by the Vietnam Chamber of Commerce and Industry (VCCI) in collaboration with the Ministry of Labor, Invalids and Social Affairs, the Ministry of Natural Resources and Environment, and the Vietnam General Confederation of Labor. Starting from 2023, the Central Economic Committee will also join this initiative.

In the CSI rankings in 2022, domestic companies accounted for 66% of the top 100 sustainable companies, while foreign direct investment (FDI) firms accounted for 34%. In the top 10, domestic companies represented 65%, while FDI firms represented 35%. These figures clearly demonstrate that domestic companies possess immense potential and readiness for “green transformation” that is on par with foreign firms.

Deputy Prime Minister Tran Hong Ha and VCCI President Pham Tan Cong, along with other delegates at the Vietnam Corporate Sustainability Forum (VCSF) 2023 - a key platform for dialogue and collaboration between the Vietnamese government and the business community on advancing sustainable development

From challenges…

However, it is important to acknowledge that Vietnamese companies face numerous obstacles and challenges on this path toward green transformation. During the Vietnam Corporate Sustainability Forum (VCSF) 2023, a prominent dialogue on sustainable business development between the government and the business community organized annually by VCCI since 2014, I was deeply impressed by two stories shared by speakers from Garment Corporation 10 and Vinacapital Company.

A representative from Garment Corporation 10 shared that the corporation operates in three major markets: the U.S., the EU, and Japan. It has hundreds of customers, with 10 large customers requiring the use of 43% recyclable materials in production. However, one of the hardships faced by Garment Corporation 10 is finding recycled materials. The supply of recycled materials in Vietnam is insufficient and heavily reliant on foreign suppliers. Additionally, the corporation must allocate investment resources for technological innovation to ensure “green production” and reduce emissions to meet importers’ requirements. This story highlights the challenges faced by companies in terms of supply chain capacity, technological prowess, and digital transformation as they transition toward responsible business practices.

Vinacapital, an investment group, prioritizes and supports green projects when selecting sustainable business projects. The group has found that companies with clear and transparent information disclosure are preferred by investors and have a higher likelihood of receiving investments. However, this poses a challenge for many Vietnamese companies due to their weak corporate governance practices and limit ed information disclosure.

Apart from the difficult matters related to sustainable corporate governance, supply chain capacity, digital transformation capabilities, and green technology transformation, companies are grappling with a shortage of skilled professionals for business activities geared toward sustainability. Furthermore, the legal framework has not yet been synchronized and lags behind domestic and international economic changes. As a result, it does not provide effective support for businesses seeking to transition to sustainable business models.

… to opportunities for a green future

In reality, the challenges I mentioned can be resolved when companies address the underlying issues in their business thinking. By changing their mindset and viewing sustainable development as an investment rather than a burden, businesses can effectively transform challenges into opportunities.

The opportunities for companies pursuing sustainable development have been quantified through research and reports published by reputable organizations. According to the Business and Sustainable Development Commission (BSDC), the successful achievement of the 17 Sustainable Development Goals (SDGs) in four sectors - food and agriculture, urbanization, energy and materials, and health and wellbeing - will generate economic gains of at least US$12 trillion for the private sector by 2030. This figure could potentially be 2-3 times higher, creating 380 million new jobs, with nearly 90% of these jobs located in developing countries. Additionally, according to Accenture Strategy’s estimation model, the circular economy has the potential to generate US$4.5 trillion in economic benefits on a global scale from 2015 to 2030. These figures represent significant opportunities for businesses to proactively embrace early opportunities and transform their business models toward a greener, more sustainable approach.

In Vietnam, we have witnessed the emergence of several exemplary businesses that have taken the lead in implementing sustainable development strategies. For instance, Vinamilk Corporation recently announced that its farms and dairies in Nghe An province have been certified as carbon neutral according to PAS2060:2014 standards. This recognition reflects the corporation’s commitment to reducing greenhouse gas emissions and contributing to its Net Zero goal. PNJ, a jewelry company, has been committed to sustainable development for many years and has been a pioneer in the field of Environmental, Social, and Governance (ESG) practices. Despite the challenges posed by the COVID-19 pandemic, PNJ has not only survived but also exceeded expectations by demonstrating remarkable resilience and recovery. This can be attributed to its sustainable business practices. Traphaco, on the other hand, has adopted an inclusive business model and has made systematic and sustainable efforts to develop its raw material supply chain. This has ensured stable production and business activities, thereby creating a strong foundation for long-term growth.

To support and promote the business community in Vietnam in practicing sustainable business more effectively in the future, VCCI and VBCSD will continue to focus on key activities. Firstly, they will put forth policy recommendations and advocate for the business community to the government. This will help create a consistent legal framework that aligns with international practices, enabling businesses to transition to low-emission and circular economic models. Government policies should be predictable and in line with international standards to instill confidence in enterprises regarding investment and development. Secondly, they will foster communication, raise awareness, and provide training to businesses. The aim is to shift their mindset from doing business “for profit” to doing business “for nature”. Lastly, they will promote and enhance the capacity of businesses in three strategic areas: transitioning to the circular economy, adopting the ESG framework and sustainable corporate governance practices, and building sustainable supply chains. Given limit ed resources, it is crucial for Vietnamese companies to identify and focus on strategic directions that can expedite their transformation in the “green race”.

VCCI hopes that these activities will be more motivational and practical for businesses striving for sustainable development. Additionally, VCCI aims to collaborate with enterprises and entrepreneurs to achieve ambitious sustainable development goals. It is believed that with the cooperation and cohesion of the Vietnamese business community, encompassing thinking, awareness and action guided by entrepreneurial ethics and sustainable business culture, Vietnamese companies will collectively “move forward sustainably”.

Nguyen Quang Vinh, Executive Vice President of VCCI, Vice Chair of VBCSD

It is necessary to transition to a circular and sustainable economy

Mr. Takeo Nakajima, Chief Representative of the Japan External Trade Organization (JETRO) Hanoi

To improve its business environment and attract foreign investment, Vietnam needs to transition to a circular economy and a sustainable development. Specifically, it needs to address the issues of air, water and soil pollution; unsafe and congested roads; deteriorated infrastructure; and waste and toxic substances. These issues affect the health and well-being of the people and the environment.

Moreover, Vietnam needs to innovate for economic development. The rapid changes in finance, health care, education, retail, information and transportation require a recognition that the current system is inadequate, and a willingness to change it. However, in each country, the current system has some rationality, so transformation requires great efforts.

Finally, Vietnam needs to promote measures that lead to healthy longevity. As Japan has experienced, the aging of society increases the social burden on all aspects, and the benefits of labor are invested more in “preservation” and “maintenance” than in “development”. Vietnam is a young country but one of the fastest-aging countries in ASEAN. The government will need substantial savings from economic development and financial resources to support the elderly.

Innovation and sustainable development as competitive advantages for businesses

Mr. Binu Jacob, CEO of Nestlé Vietnam, Co-Chair of VCBSD

Innovation and sustainable development need to go hand in hand to achieve business goals while addressing social and environmental issues.

For decades, businesses have focused on total shareholder return (TSR). However, for long-term and sustainable development, they need to create value not only for shareholders but also for society as a whole. This is measured by total societal impact (TSI). Nowadays, investors are increasingly concerned about companies that operate effectively and have positive impacts on the environment, society and governance as well as contribute to addressing social and climate change challenges.

For Nestlé, one of the leaders in sustainable development, creating value for society is a driving force. In Vietnam, Nestlé is carrying out many sustainable initiatives to generate positive environmental and societal impacts, with priorities given to physical development and nutrition for children, responsible sourcing, climate action and water management, women’s empowerment, and sustainable packaging.

To help boost physical development and encourage a healthy and active lifestyle in the community, especially for children aged 6-17, Nestlé Vietnam and its Nestlé MILO brand implemented the “Vietnam Dynamic” Program. To fulfill its commitment to responsible sourcing, Nestlé Vietnam has implemented the Nescafé Plan for sustainable coffee farming in Central Highlands provinces since 2011, supported more than 22,000 farmer households to access and practice 4C coffee production, trained more than 330,000 farmers, and delivered 63.5 million disease-resistant and high-yield seedlings to replant old coffee tree areas. As for social issues, fostering women’s economic empowerment and status is an important part of Nestlé’s approach. Since 2017, the Vietnam Women’s Union and Nestlé Vietnam have cooperated in implementing the “Nestlé with Women” Program in 20 provinces and cities nationwide, which attracted 4,600 women members.

It is necessary to consider amending issues in pharmaceutical management

Mr. Bui Hong Minh, Corporate Affairs Director at Pharmacity

To create a suitable legal corridor for the sustainable development of the pharmaceutical retail sector, Pharmacity urges the government to consider revising some aspects of pharmaceutical management to align with the current development realities. Specifically, we propose that the government should recognize the chain business model as a type of pharmaceutical retail business and create a legal framework to encourage the development of this model in the future to improve public health care quality.

We also suggest that the government should establish legal regulations for pharmaceutical retail business on e-commerce platforms to meet people’s growing demand for access to drugs as well as to ensure the safety of drug use and drug management.

Pharmacity is a trusted pharmaceutical retailer, providing customers in Vietnam with the most convenient multi-channel shopping experience. With the aspiration to collaborate with the government in enhancing people’s health, Pharmacity is always proactive in working with the Ministry of Health and leading hospitals to further promote the development of the pharmaceutical industry. We believe that the partnership between the government and businesses in developing policies will certainly bring better results in the future.

Transforming business models, human development and innovation

Promoting sustainable agriculture

Mr. Nguyen Trung Anh, Director of Research and Sustainable Development at PAN Group

Vietnam has achieved remarkable results in agriculture in recent years. The total export turnover of agriculture, forestry and aquaculture reached US$53.2 billion in 2022 and is expected to surpass US$54 billion in 2023. However, Vietnam still faces many challenges in developing sustainable agriculture, such as the low value-added of raw exports, the high cost of input materials, and the environmental degradation caused by unsustainable practices. To address these issues and contribute to the net-zero goal, we suggest the following recommendations to the government:

Firstly, the government should support research and development activities to foster green technology innovation, the use of climate-resilient varieties, the conservation and utilization of rare and valuable genetic resources, and the enhancement of economic value of agricultural products.

Secondly, the government should increase education for farmers on sustainable farming and processing methods. For instance, Vietnam Fumigation Company (VFC) - a member of the PAN Group, has implemented the program “Supporting Farmers” for several years to help farmers adopt modern farming practices, thereby improving productivity, income, and environmental quality. However, this program has not reached all farmers nationwide due to limit ed resources from businesses. If expanded to a national scale with the collaboration of local authorities and departments, this program would be more effective.

Thirdly, the government should revise agriculture-related policies to ensure the feasibility of sustainable development solutions. One of the key solutions is to consolidate and concentrate land to develop medium-sized farms, which would create a basis for large-scale production and facilitate the application of science and technology to increase efficiency and productivity.

Lastly, the government should provide more support in terms of finance, investment, transportation planning and logistics to enable businesses and farmers to invest in sustainable agricultural projects.

Mr. Ngo Dinh Duc

General Director of POCD Consulting Corporation

To enhance sustainable competitiveness in an unfavorable macroeconomic context, the rapidly evolving Technology 4.0 and fierce market competition, businesses need to take the following steps:

They should reassess their business models for rational changes in organizational patterns and review work processes to respond quickly and flexibly to changes in the business environment. This may include reducing bureaucracy and increasing adaptability in decision-making and project implementation. Organizational redesigning may also include creating multifunctional teams and encouraging collaboration and communication among different departments with software tools.

They should apply new methods and technologies to management and production processes to enhance efficiency and flexibility. Technologies such as artificial intelligence, automation and IoT can be used to optimize manufacturing processes, reduce waste and improve product and service quality.

They should focus on human development investment as an important factor in enhancing sustainable competitiveness. Businesses should concentrate on training and developing employees to raise their knowledge and skills needed for work in a high-tech and competitive environment. At the same time, building an inspiring working environment that encourages creativity and personal development is necessary to attract and retain talent.

They should capture information and survey the market to seize opportunities opened by trade agreements and strategic partnerships signed with the United States. In the meantime, build partnerships and strategic alliances with domestic and foreign partners to share resources and knowledge and create community values.

They should grasp and respond quickly to new trends in the market. Businesses need to regularly conduct market surveys to understand and forecast customer needs as well as monitor technology trends and benefits from trade agreements. This helps them create market-relevant products and services and increase competitiveness.

They should foster creativity and innovation as important factors in enhancing sustainable competitiveness. Businesses need to create an environment that stimulates creativity and innovation, and encourage employees to engage in generating new ideas and testing new solutions. At the same time, they can also cooperate with peripheral partners, research institutes and universities to take advantage of external resources and knowledge.