Sustainability Practices: Helping businesses to become more resilient and improve public images

Deputy Prime Minister Vu Duc Dam, Chairman of the National Council on Sustainable Development and Competitiveness Improvement, affirmed that sustainable development has become an inevitable trend while addressing the Vietnam Corporate Sustainability Forum 2021

After six years of implementation, how has CSI impacted sustainable corporate governance? What is new in this seventh edition?

After six years of carrying out the Program on Benchmarking and Announcing Sustainable Businesses and promoting CSI application (CSI Program) in the business community, we have found out that Vietnamese businesses are gearing up governance toward a transparent, environmentally responsible business model and community development. This has also produced a positive impact on their business performance.

Specifically, businesses that participate in the program have significantly higher labor productivity, remarkably improve the income of employees and make more social contributions than those that don’t. They also have better competitiveness, especially in better-invested product research and development and sustainably guaranteed supply sources.

Sustainability certification will open up opportunities for businesses to improve their public images, attract human resources, and capture new business opportunities thanks to the increased trust of partners, investors and shareholders. Therefore, a majority of CSI Program candidates expressed their desire to continue the Program in the coming years.

2022 is the 7th year in a row that VCCI has launched the Program in coordination with the Ministry of Natural Resources and Environment (MONRE), the Ministry of Labor, Invalids and Social Affairs (MOLISA) and the Vietnam General Confederation of Labor (VGCL). The Organizing Board sorted out 148 finalists from more than 600 candidates and will announce the 99 most outstanding companies at the Announcement Ceremony of Sustainable Businesses in Vietnam on December 1.

The CSI Program 2022 also has first-time candidates who account for nearly 25%, showing that more companies care about the CSI Program and sustainable development in general. Another new content this year is that the Organizing Board only accepted online filing, helping candidates manage their documents and records more easily as well as helping the Judge Council to give scores more favorably than before. In addition to honoring sustainable companies, the core content, the Program also found pioneering businesses that outperformed in three thematic categories: Promote women's empowerment and gender equality in the workplace; Respect human rights and children's rights in business; and adopt the circular economy and response to climate change.

In his keynote speech at the Vietnam Corporate Sustainability Forum 2021, VCCI President Pham Tan Cong said that businesses that have adopted sustainability practices are more resilient against global challenges

How has CSI been better adapted for the business community, especially small and medium enterprises?

Every year, CSI is updated and upgraded to become more complete, friendlier and closer to detailed and specific criteria to match domestic legal regulations and international standards and requirements. Among 130 CSI indicators in 2022, up to 68% is related to legal compliance requirements, while 32% is associated with sustainable business initiatives. This shows that, only by complying well with legal provisions can companies build a solid foundation for sustainable development in general and are easily appreciated in the Program on Benchmarking and Announcing Sustainable Businesses in particular.

It is necessary to emphasize that regulatory compliance is a basic requirement for all, even SMEs. Therefore, CSI application is not distant for SMEs. Many of the CSI-applied companies said that CSI can effectively help formulate business strategies and plans, review business gaps, work better and promptly seize new business opportunities.

Particularly, environmental, social and governance matters under the ESG framework have been more focused by VBCSD this year, expressed by ESG integrated into the working agenda of breakout sessions on corporate governance at this year’s Vietnam Corporate Sustainability Forum (VCSF), as well as at the plenary session on December 1. ESG is also integrated into the updated CSI 2022.

You have mentioned that ESG is embedded into the CSI Index. Would you tell us more about this standard and its benefits for ESG-applied businesses?

 By incorporating ESG into the new 2022 version of the CSI Index, businesses will have a more intuitive approach to their governance through three aspects:

The first is companies’ interaction with the natural environment, the natural capital for them. That is illustrated by their activities to respond to climate change, protect biodiversity, conserve natural resources, and reduce carbon emissions as well as air and water pollution.

The second is their impacts on society and community through their programs and activities to protect occupational health and safety, improve working conditions, and fulfill their legal obligations to enhance occupational health and safety, gender equality, diversity, inclusion, human rights and children's rights in business, privacy and data security of customers and partners, or sustainable livelihoods for vulnerable groups via inclusive business models.

And finally, there are principles to be applied when building the corporate governance apparatus at each business, which includes governance, transparency reporting, code of business conduct, increased ownership of shareholders and employees, and independent mechanism of the Board of Directors.

In Vietnam, ESG is becoming an important factor that presents a complete picture of business and facilitates globalization for companies. A recent PwC study surveyed 325 investors from around the world. Most respondents showed their commitment to ESG goals and assigned this as a top priority in their businesses where they have invested. More specifically, companies with high ESG performance evidently have lower risk exposure, higher profitability and better resilience to crises.

In my opinion, an integrated development strategy with innovative ESG solutions can create competitive advantages for businesses, open up potential cooperation opportunities, increase access to capital, and foster sustainable development

What should companies do to effectively integrate ESG into their business development?

Mr. Nguyen Quang Vinh, Executive Vice President of the Vietnam Chamber of Commerce and Industry (VCCI), Chairman of the Vietnam Business Council for Sustainable Development (VBCSD).

I think that in the current context, to meet ESG information disclosure regulations, companies need to take some basic steps. First, to build an effective ESG strategy, they should not just follow the ESG framework to get a high score but really understand EGS values and integrate ESG in decision making. Particularly, to strengthen their leadership in ESG transformation, business leaders and owners need to regularly review and incorporate ESG into core activities.

Second, ESG transformation needs to be done in a synchronous and systematic manner. For businesses in Vietnam, when practicing ESG, many elements in the initial process may not be appropriate, causing a lot of operational inadequacies and negatively affecting time and costs. Meanwhile, each E-S-G element is closely linked to each other and will motivate each other. Therefore, initiatives need to be synchronized and systemized to optimize cost and time and promote common strategic development.

Third, the ESG transformation strategy needs cross-cutting activities, from shaping the vision and goals to taking steps to scale up. ESG transformation in enterprises in general or in private enterprises in particular cannot be done in a short-term but must go through an iterative process, starting with pilot projects and continuous improvement and scaling.

I recommend companies actively study the CSI Index and use it as a tool to support sustainable corporate governance and self-assess their "health" in all economic, social and environmental aspects. This will also support them to practice the ESG framework. In the coming time, VBCSD will organize training courses on ESG, CSI and sustainability reporting for the business community to better support them. That will help them improve their governance capacity and competitiveness and better attract sustainable investment capital into business.

Thank you very much!