EU partners no longer 'lenient', Vietnam must adapt through ESG policies

Adhering to green and sustainable development criteria when working with EU partners under free trade agreements (FTAs), especially the EVFTA, is not a new challenge.

However, during a seminar titled “Legal Issues of the European Union on Emerging ESG Markets and Policy Implications for Vietnam,” held on October 31, 2024, Associate Professor Dr. Nguyen Thanh Hieu, Vice Rector of the National Economics University, highlighted that despite ongoing discussions, many Vietnamese businesses still fall short of export requirements or face product rejections in the EU market.

The primary reason is the lack of understanding or non-compliance with legal and technical quality standards.

European partners no longer view Vietnam as an “underdeveloped” nation deserving preferential treatment. With the country’s rapid economic growth and its shift to middle-income status, EU standards have become more stringent.

Associate Professor Dr. Nguyen Thanh Hieu noted that the EU has formally codified regulations pertaining to sustainable development and ESG (environmental, social, and governance) standards.

Compliance must come not only from businesses but also through adjustments in Vietnam’s national policies and legal framework.

The government should assist enterprises in bolstering their compliance efforts and create a supportive legislative environment.

The EU has codified regulations related to sustainable development and ESG. Photo: ST

Experts advocate for revising and updating regulations, especially those related to ESG, to boost the competitiveness of businesses in the supply chain and facilitate exports.

Associate Professor Dr. Do Phu Hai from the University of Economics and Business, Vietnam National University, Hanoi, pointed out that the EU’s Corporate Sustainability Reporting Directive (CSRD) requires detailed ESG reporting from businesses.

Vietnam could implement a similar system to promote transparency, incorporating stricter audits and oversight of ESG reports, integrating ESG into economic planning, and mandating that large enterprises disclose ESG data.

The EU’s Taxonomy Regulation, which defines sustainable activities and encourages green investment, could inspire Vietnam to develop its own ESG classification framework.

The Corporate Sustainability Due Diligence Directive (CSDDD), which mandates social and environmental responsibility checks across supply chains, is another regulation from which Vietnam could take cues. Emphasizing transparency, accountability, and enforcement, while supporting small and medium enterprises (SMEs) in ESG practices, would be beneficial.

The EU promotes ESG integration to enhance business competitiveness, and Vietnam should introduce similar incentives through supportive policies, green investment and finance initiatives, and increased ESG awareness and training.

Experts from Hanoi Law University also noted that ESG reporting on labor practices is becoming a global legislative trend and a priority in EU policy and among member states.

Vietnam should study these practices and shape a clearer legal framework to align with international standards.