As Environmental, Social and Governance (ESG) standards have become mainstream and widely recognised as crucial for businesses, Vietnamese firms have been ready to embark on the ESG journey.

In its Vietnam ESG Readiness Report 2022, PricewaterhouseCoopers (PwC) says 80 per cent of firms in Viet Nam have made ESG commitments or planned to do so in the next two to four years.

By company type, 57 per cent of foreign-invested firms have claimed to make explicit ESG commitments. Listed firms, on the other hand, appear to take a 'wait and see' approach as 58 per cent state they have plans to embrace ESG in the near future.

Interestingly, 40 per cent of private family businesses say they have committed themselves to ESG. The figure indicates the strong sense of responsibility among Vietnamese NextGens that family businesses should be at the forefront of sustainable practices.

"82 per cent of respondents across industries choose brand image and reputation as the top reason to pursue ESG while staying competitive is the second cited reason," says the report.

When firms are asked to rank the three ESG elements in order of importance, 62 per cent put Governance at the top of the executive agenda. Environmental and social factors follow with 22 per cent and 16 per cent, respectively.

The focus on Governance comes from the firms' belief that stronger governance will result in better decision-making in both the environmental and social dimensions.

It is also worth noting that the Vietnam Sustainability Index (VNSI) was launched in July 2017 to recognise the best-listed firms on HCM Stock Exchange in terms of ESG practices.

Vinamilk has been among the top 20 VNSI green stocks since then with an ESG score of 90 per cent, far higher than the industry average.

Specifically, the dairy producer earned a Governance score of 96 per cent, a Society score of 91 per cent and an environmental score of 85 per cent, reflecting its effort to incorporate ESG into its operation.

"Sustainable development is no longer a choice but an imperative for firms' viability and growth," said Vinamilk CEO Mai Kieu Lien.

While ESG commitment is at a commendable level, PwC report says that there are still gaps between ambition and action.

Of the 66 per cent of firms having implemented some form of ESG programmes, 22 per cent say they have all-inclusive programmes, 28 per cent have solid programmes that cover some ESG aspects, and 16 per cent have limited plans with a few ESG elements.

Remarkably, 35 per cent of respondents admit having no ESG programme whatsoever.

"In some areas, Vietnamese businesses have made progress while showing room for improvement in others," says the report.

The report also says accurate and timely data is the key to meeting the growing demand from different stakeholder groups for wider ESG assessment.

Unfortunately, a majority of firms (71 per cent) have either not started or are just beginning to understand the required ESG data.

Firms need both ESG targets and metrics to produce the desired outcomes. However, the report shows that less than one-third of respondents have a set of comprehensive risk metrics.

Roughly 31 per cent say they are in the process of developing metrics whereas 41 per cent say they have not got down to it yet.

"The board is a central player in overseeing and integrating ESG risks and opportunities in their organisation," said Dinh Toan Trung, Strategy Director, VIOD Academic Advisory Council.

According to Bloomberg Intelligence, global ESG assets are expected to surpass US$41 trillion by 2022 and $50 trillion by 2025, one-third of the projected total assets under management globally. — VNS