Proactively safeguarding export competitiveness

However, supply chains are also where sustainability values are tested. With the European Union’s (EU) new regulations and requirements on supply chain due diligence, Vietnamese exporters face the risk of being excluded from global value chains if they fail to adapt in time.

Risk of being excluded from supply chains

According to the Viet Nam Chamber of Commerce and Industry (VCCI), major global economies are gradually shifting their approach to supply chain governance to ensure economic efficiency and sustainable development values.

In the past two years, several EU member states have introduced and enforced a series of new legal regulations on monitoring, assessing and preventing risks related to human rights and the environment within supply chains, commonly known as supply chain due diligence.

These rules are currently the most stringent in the world. They apply not only to EU-based enterprises but also extend across global supply chains. As vital “links” providing materials, logistics and labour for sectors such as textiles and garments, leather and footwear, electronics, agriculture and fisheries, Vietnamese enterprises will inevitably be affected.

The EU remains Viet Nam’s second-largest export market, with annual export turnover of around 40–50 billion USD, making up a significant share of Viet Nam’s market diversification strategy.

Yet supply chain due diligence is creating major challenges for maintaining export momentum, compelling Vietnamese businesses to ensure transparency in labour, environmental and human rights information to sustain partnerships under EU regulations.

A recent VCCI survey found that 59.3% of Vietnamese enterprises and organisations involved in exporting to the EU had never heard of supply chain due diligence regulations, while 36.6% had only heard the term but did not understand its specifics.

This illustrates a major gap between changing EU policies and Viet Nam’s level of preparedness, one that could reduce competitive advantages, especially as businesses in India and Indonesia are pushing ahead with ESG (environmental, social and governance) compliance.

Failure to meet the standards, violation of cooperation rules or refusal to provide information could lead to severe consequences, such as having orders cancelled, being removed from supply chains, missing opportunities to expand market share, or even indirectly facing international trade disputes.

To fully understand the EU’s supply chain due diligence requirements, Dr Nguyen Thi Thu Trang, Director of the WTO and Integration Centre under VCCI, emphasised the need to enhance information dissemination for stakeholders in Vietnam. At the same time, businesses must proactively raise awareness, strengthen competitiveness within supply chains, prepare for compliance, and avoid both complacency and excessive anxiety.

For Vietnamese enterprises, safeguarding long-term interests means strictly adhering to Vietnamese laws on labour and the environment; promptly identifying and preventing risks of violations; properly storing documentation and evidence; and actively coordinating with partners on due diligence procedures. Ultimately, enterprises should maintain active communication and appropriate coordination when partners request implementation of due diligence measures.

Action needs to be taken early

According to Dr Nguyen Thi Thu Trang, one of the biggest obstacles for businesses today is the shortage of specialised legal and integration consultants.

To avoid adverse impacts from increasingly stringent EU requirements on product standards, associations and related organisations need to step up information support and capacity building for members through broad-based communication channels with accurate, tailored content for each target group.

State management agencies must detect and warn against risks of labour and environmental violations as soon as they arise through inspection and supervision; while also supporting businesses in verifying and certifying compliance to help them maintain and sustainably develop this key export market.

Vanessa Steinmetz, Director of FNF Viet Nam, noted that the EU’s new requirements are reshaping global supply chains to become more transparent and sustainable.

Initially, many businesses may find these rules complicated, even overwhelming. However, the essence of the matter is building trust between producers, suppliers and consumers.

Therefore, as long as companies demonstrate transparency, accountability and good governance, they will become stronger and more competitive partners in the international marketplace. Furthermore, improving understanding of global supply chain changes and preparing early for new rules will help shape sustainable exports to the EU in the years ahead.

Despite potentially high initial compliance costs that may discourage businesses, such costs are a worthwhile investment for sustainable development. Once compliant, businesses will be more highly regarded and secure more long-term contracts.

This is also an opportunity for enterprises to upgrade their governance capacity and become more resilient to future global trade fluctuations. Clearly, addressing these challenges requires Government coordination, from intensifying communication to supporting enterprises through training programmes and green transition funds.

Industry associations must serve as bridges, organising more workshops to update information for businesses. Meanwhile, enterprises themselves must proactively adapt, invest in management systems, improve product quality and enhance cooperation with EU partners to share experience.

Importantly, the EU’s new regulations should be viewed as an inevitable trend that will help strengthen businesses, enabling them to integrate more deeply into the global economy in a transparent and sustainable manner, continuing to affirm the position of Vietnamese goods on the global trade map.