A discussion session at the “ESG – Key to sustainable development: Solution for promoting businesses to effectively practice ESG standards” seminar in HCM City on Thursday. — Photo courtesy of the VIAC

HCM CITY — The importance of environmental, social and governance (ESG) and the need to have regulatory transparency and guidelines to promote them were discussed at a seminar in HCM City on June 20.

The HCM City Institute for Development Studies, HCM City Centre of International Integration Support, the Việt Nam International Arbitration Centre (VIAC) and HCM City Union of Business Associations organised the “ESG – Key to sustainable development: Solution for promoting businesses to effectively practice ESG standards” seminar.

In his opening remarks Dr Trần Du Lịch, vice president of the VIAC, said sustainable development associated with the circular economy is a global trend, with the business community especially paying attention to ESG practices.

Phâm Bình An, deputy director of the HCM City Institute for Development Studies, said in the context of global integration, Vietnamese businesses are facing pressure to meet some stringent requirements in terms of green and sustainable development.

The Government, ministries and other agencies have made statements and commitments and proposed several plans towards achieving green transformation and sustainable development.

HCM City late last year issued a strategic framework for green growth for until 2030 and policies to motivate public to sign up for green transformation, he said.

Giandomenico Zappia, EuroCham.s board member, said in the context of the Government and business aiming for sustainable development, making ESG disclosure is necessary to provide stakeholders with transparency and a more holistic view, promote market transparency, enhance sustainable financial decisions, and enable companies to access capital and gain customers’ trust.

ESG practices and reporting allow companies to ensure compliance and identify risks and opportunities, he said.

The EU has issued many regulations on ESG disclosure, including the EU Taxonomy that provides an aligned classification system to define “green” economic activities, the Sustainable Finance Disclosure Regulation, Corporate Sustainability Reporting Directive, Carbon Border Adjustment Mechanism, and Regulation on Deforestation-free Products.

In Southeast Asia, Singapore has required listed companies to prepare annual sustainability reports since 2016 on a “comply or explain” basis, created a mandatory climate reporting road map for listed issuers from fiscal year 2025 and large non-listed companies from 2027, and other regulations.

In Việt Nam, the Ministry of Finance issued Circular No.96/2020/TT-BTC to mandate environmental and social impacts disclosure by public companies and those with bonds listed/publicly offered.

The State Security Commission has developed a sustainability reporting handbook for companies and a greenhouse emissions reporting guidebook to promote disclosure of environmental and social information by listed companies.

He also spoke about the challenges to ESG disclosure, including data challenge (collecting, processing, and reporting ESG data can be complicated), diverse options of ESG standards that may lead to confusion and inconsistency and the huge resources required to do it.

In addition, “No mandatory application of any specific standard offers firms flexibility and authority, but they could cause confusion and inconsistency in processes, disclosure practices and quality.

“Regulatory transparency and guidelines are needed to nudge ESG disclosure of firms.”

Lich said to practice ESG, businesses need to have a road map and serious investment in each standard.

Of them, the most important factor is related to governance, because good governance would be the basis to help businesses meet environmental and social criteria, he said.

In governance, firms need to focus on management of risk, an issue many businesses face when embracing ESG, he said.

To improve the risk management capacity of businesses, governments and relevant organisations need to quickly develop mechanisms, policies and legal regulations to offer them clear guidance, he added.

Nguyễn Đình Thọ, director of the Institute of Strategy and Policy on Natural Resources and Environment, said green economic development also offers businesses opportunities to expand markets and enhance their competitiveness in attracting investment.

He said it is necessary to focus on measuring emissions since it is the basis for ESG performance and setting corporate goals.

Each business needs to create a suitable road map to adopt ESG standards scientifically, effectively and in accordance with their goals, he said.

Speaking about the practices related to applying ESG, Đỗ Thị Thu Hà, deputy CEO, head  of sustainable development consulting at KPMG Vietnam, said Vietnamese companies hugely appreciate the importance of ESG, with 80 per cent of having commitments  or planning to adopt ESG soon.

But only about 28 per cent of businesses have a clear ESG risk measurement index to track progress.

Companies face challenges in ESG implementation like lack of instructions from official agencies, lack of awareness among stakeholders, lack of expertise in ESG, and difficulties in assessing the indirect impacts of climate change, she said.

So, to effectively pursue and apply ESG criteria, businesses need to recognise and answer questions about the sustainability they desire and the measures they can apply to find the right approach.

At the seminar, businesses also shared their experiences in adopting ESG standards.  — VNS