As part of global value chains, Vietnamese businesses (enterprises) will soon be required to provide ESG reports to ensure sustainable development in an increasingly integrated economy.
The ESG (Environmental, Social, and Governance) strategy not only helps companies improve their business operations but also plays a critical role in addressing the growing societal and environmental challenges. However, creating a transparent and convincing ESG report remains a significant challenge for many enterprises, especially small and medium-sized enterprises (SMEs). While ESG reports enhance credit reputation, expand investment opportunities, and create long-term competitive advantages for enterprises, many still struggle to determine where to start, especially when there are numerous global ESG standards and frameworks to follow.
Steps to Build a Transparent ESG Report
According to Mr. Anh Nguyen Tuan, Director of Sustainable Development Consulting at FPT Digital, as part of global value chains, Vietnamese enterprises will soon be required to provide ESG reports to ensure sustainable development within an integrated economy. It is noteworthy that although awareness of digital transformation (DT) and ESG in the business community is relatively high, only 22% of Vietnamese enterprises have a clear roadmap for ESG over the next 10–15 years, according to a survey. “This reveals a significant gap between awareness and action,” said Mr. Anh
To address the challenges of creating an ESG report, enterprises must thoroughly understand international ESG standards and the specific requirements of each market. This involves in-depth research of standards such as GRI (Global Reporting Initiative), SASB (Sustainability Accounting Standards Board), and the GHG Protocol (Greenhouse Gas Emissions Inventory). Understanding these standards will help enterprises identify the necessary steps to comply with and meet ESG requirements.
When developing an ESG report, enterprises should adhere to international reporting standards to ensure transparency and credibility. Reports should provide comprehensive information on activities, progress, and achievements. Effective communication with stakeholders, including investors, customers, employees, and the community, is also crucial. Using appropriate communication channels will ensure that information reaches the target audience.
In addition, enterprises should establish a dedicated ESG team. “This team should include internal experts and potentially external consultants to ensure sufficient knowledge and experience. Training employees on the various aspects of ESG is also essential to help them understand their role and responsibilities in data collection and ESG initiatives,” said Mr. Anh Nguyen Tuan.
Once the ESG team is in place, enterprises should conduct a comprehensive assessment of their current ESG status to identify strengths, weaknesses, opportunities, and challenges. This will enable them to develop a clear transformation plan. Based on this assessment, enterprises can set specific and achievable goals for each element of ESG, including environment, society, and governance. Importantly, ESG should be integrated into the overall business strategy to ensure that ESG activities are not standalone efforts but a core part of the enterprise’s long-term growth strategy.
Implementing specific initiatives and projects to improve ESG aspects, such as waste management, energy savings, community support, and corporate governance improvements, is also necessary. The timing of the ESG report can be flexible depending on the needs and objectives of the enterprise. However, enterprises should aim to produce ESG reports annually or quarterly to keep stakeholders updated on their activities.
“By following these steps, enterprises can create a transparent and convincing ESG report. This will not only enhance the credibility and reputation of the enterprise but also contribute to the sustainable development of the community and environment,” said Mr. Anh Nguyen Tuan.
Greenhouse Gas Emissions and ESG Risk Assessment Tool for Enterprises
It is expected that nearly 2,000 enterprises in Vietnam will be required to inventory their greenhouse gas emissions and comply with emission quotas under Decision 01/2022/QD-TTg dated January 18, 2022, which establishes the list of sectors and facilities required to conduct greenhouse gas emission inventories. At the recent Vietnam – Asia DX Summit 2024, themed “Digital Transformation, Green Transformation, and Digital Economy Development,” FPT Digital representatives emphasized that the appropriate ESG approach for enterprises is based on their business models.
The greenhouse gas emissions and ESG risk assessment tool from FPT Digital provides data and analysis to help enterprises make strategic decisions in managing risks and implementing measures to mitigate environmental impacts. The tool is highly applicable to various industries, such as manufacturing, transportation, environment, and construction. However, its effectiveness depends on the accuracy and completeness of the input data provided by the enterprises. Enterprises may also require expertise or external support to use the tool effectively.
In reality, achieving sustainable development and green growth cannot rely solely on the efforts of individual enterprises. Building an ecosystem involving stakeholders such as the government, business communities inside and outside the industry, and consumers is critical. This can be achieved by establishing collaboration mechanisms between stakeholders, creating a legal and business environment that promotes sustainable development, and enhancing participation and information sharing among partners in the ecosystem. Furthermore, the creation of stable and incentivizing policies is essential to attract interest and participation from all ecosystem stakeholders.
