In the context of sustainable development becoming a global trend, ESG (Environmental – Social – Governance) reporting is increasingly considered a “green passport” for businesses when participating in the international value chain. If ESG was previously only voluntary, many countries and regions have now issued mandatory regulations on ESG reporting, including Vietnam. So what is ESG reporting? ESG reporting regulations What are the elements included? Let's find out the details with GREEN IN in the content below!
Overview of ESG and the role of ESG reporting for businesses
Unlike financial reports that only reflect business performance, ESG reports focus on how businesses use resources, protect the environment, treat employees and customers, and operate transparent governance. According to the definition of UN PRI - Principles for Responsible Investment, ESG is an important framework for investors to make decisions to minimize risks and create long-term profits in the context of globalization. A study by McKinsey (2020) shows that businesses that implement ESG well can reduce operating costs by up to 10%, while easily accessing preferential capital from green investment funds.
Currently, many countries and international organizations have incorporated ESG into their legal systems, and consider it one of the mandatory standards. For example:
- European Union: Issued the CSRD (Corporate Sustainability Reporting Directive), requiring more than 50.000 businesses to disclose ESG information from 2024.
- US Securities and Exchange Commission (SEC): Regulations are being developed requiring listed companies to report climate-related risks.
- Japan: From 2022, the Tokyo Stock Exchange will require companies listed in the “Prime Market” group to disclose information based on TCFD.
- Singapore: The Monetary Authority of Singapore (MAS) will require banks, insurers and financial institutions to report according to the TCFD standard from 2022.
- Korea: The government has announced plans to force all large listed companies to prepare sustainability reports from 2030.
This trend shows that ESG is not only a tool to "create a good image" but is becoming a legal barrier for businesses wanting to participate in the global market.
ESG reporting regulations according to international standards
Currently, to guide businesses in disclosing ESG information, many international organizations have developed widely used standards and reporting frameworks, specifically as follows:
- GRI (Global Reporting Initiative): This is the world's most popular set of sustainability reporting standards, applied by more than 10.000 organizations in 100 countries. GRI focuses on measuring the economic, environmental and social impacts of businesses, with a particular emphasis on transparency in information disclosure.
- SASB (Sustainability Accounting Standards Board): SASB develops industry-specific reporting standards (77 specific industries) to help businesses disclose ESG factors that directly impact financial performance. This set of standards is consistent with the expectations of investors and financial institutions.
- TCFD (Task Force on Climate-related Financial Disclosures): Initiated by the Financial Stability Board (FSB), TCFD focuses on information related to climate risks, including 4 pillars: governance, strategy, risk management and indicators - targets. Many G20 countries have committed to applying TCFD in the sustainable development roadmap.
- IFRS – ISSB (International Sustainability Standards Board): In 2021, IFRS established the ISSB to unify global sustainability reporting standards. In June 2023, ISSB issued its first two standards: IFRS S1 (general requirements for sustainability disclosures) and IFRS S2 (climate-related disclosures), which lay the foundation for integrating ESG into financial reporting.
ESG reporting regulations in Vietnam
In Vietnam, ESG reporting is regulated in many legal documents related to the environment, securities and corporate governance. Some of the main legal frameworks include:
- Law on Environmental Protection 2020: For the first time, the concept of circular economy, sustainable development and extended producer responsibility (EPR) is introduced into the law. At the same time, Article 137 requires organizations and enterprises to publicly disclose environmental information, creating a foundation for ESG reporting to the Vietnamese National Assembly.
- Securities Law 2019 and Circular 96/2020/TT-BTC: Listed companies are required to disclose information related to sustainable development in their annual reports. This includes energy use, water, emissions, biodiversity, labor policies and social responsibility.
- Regulations of the State Securities Commission (SSC): The State Securities Commission has issued guidelines on Sustainability Reporting for listed companies according to the GRI Standards since 2015, and continues to require public companies to integrate ESG content into their annual reports.
Subject of application
The above provisions are mainly applied to the following subjects:
- Enterprises listed on the HOSE and HNX are required to publish sustainable development reports or integrate ESG content in their annual reports.
- FDI enterprises and export enterprises, although not yet required by Vietnamese law, are under pressure to comply with ESG from international partners (especially the EU, US, and Japanese markets), otherwise they will face barriers when participating in the supply chain.
Required content in ESG reporting
According to the Circular 96 / 2020 / TT-BTC and guidance of the State Securities Commission, the key information groups that businesses need to disclose include:
- Environmental index: including indicators on energy consumption, water management, greenhouse gas (GHG) emissions, solid waste and hazardous waste management.
- Social index: figures on workforce numbers, gender equality, occupational safety and health, employee training, community policy.
- Management index: including the structure of the Board of Directors (BOD), the participation of independent members, internal control mechanisms, information transparency and anti-corruption.
It can be seen that Vietnam does not yet have a unified set of ESG standards like CSRD (EU) or TCFD (international), but is gradually approaching international practice by integrating sustainable development content into annual reports. This will be a stepping stone for Vietnam to move towards building a set of widely applicable national ESG standards in the future.
Conclusion
ESG reporting regulations has become a global standard, moving from voluntary to mandatory in many countries and regions. Vietnam is not out of that trend as it gradually completes the legal framework, piloting it with listed enterprises and aiming to expand it to many key industries in the period 2025 - 2030. At the same time, the commitment to Net Zero at COP26 further affirms that ESG will be an important tool for Vietnamese enterprises to integrate into the international sustainable development process.