In Vietnam, environmental protection or sustainability activities are increasingly gaining attention. Sustainability regulations and standards have gradually become popular, but ESG standards are probably still new. So what are ESG standards? What aspects are in ESG standards? Let's find out together. GREEN IN Find out in the article below!
1. What is ESG standard?
ESG Standards is a set of criteria used to evaluate the sustainability, impact of business activities, investment, production or management efficiency of an organization/enterprise. This is a standard framework that helps organizations and investors more easily consider non-financial factors, which play an important role in creating long-term value, as well as effective risk management.
2. What are the pillars of ESG?
As mentioned above, ESG standards typically include three main pillars:
- Environmental (Environment): Issues related to environmental protection and natural resources. These include climate change, energy use, natural resources, waste treatment and recycling, circular economy, etc.
- Social (Social): Issues that concern stakeholders such as employees, customers & consumers and the surrounding community. Specific issues include privacy and security, diversity, equity and inclusion, gender equality, social opportunity…
- Governance (Corporate governance): Related to the organization's operations, these include corporate governance, intellectual property rights, alignment with business strategy, business ethics, etc.
3. What ESG standards should Vietnamese businesses pay attention to?
Choosing the right ESG standards should be based on factors such as legal regulations, requirements of partners in the value chain or information needs of stakeholders. However, for Vietnamese enterprises in the early stages of ESG practice and reporting, applying all ESG standards is not really necessary. Instead, enterprises should filter and focus on appropriate standards.
3.1. GRI Standards
This is a standard issued by the Global Sustainability Standards Board (GSSB), with an “impact materiality” approach. GRI is currently recognized as the most popular standard in the world, with 68% of the world’s top 6800 companies applying it. Therefore, Vietnamese businesses can apply this standard to ESG reporting.
GRI will most clearly reflect the impacts of production and business activities of enterprises on the environment and society. In Vietnam, these impacts are of concern to management agencies, partners, employees, and consumers, so responding well is necessary.
3.2. International sustainability reporting standards IFRS
This is a sustainability standard published by the International Sustainability Standards Board (ISSB) with a “financial materiality” approach. This set of standards was formed based on the consolidation of many standards with the same approach. These include CDP’s Climate Disclosure Standards Board (CDSB), the Integrated Reporting Framework (IR) and the Value Reporting Foundation’s SASB Standards, and the TCFD Standards. These standards were agreed upon by the countries attending the COP 26 Conference.
The international sustainability reporting standards IFRS include S1, which is the requirement for disclosure of financial information related to sustainability. S2, which is transparency about climate-related information.
3.3. ESRS Standards
The third standard that Vietnamese enterprises should pay attention to is the European Sustainability Reporting Standard (ESRS), with the “dual materiality” approach. Accordingly, enterprises subject to this standard will have to publicly disclose the impacts of their production and business activities on the environment and society, and the impacts of ESG factors on the financial situation and development of the company.
Conclusion
The above is information about ESG standards that businesses need to meet during their operations. To properly implement and complete the above standards, business leaders need to clearly understand ESG standards to apply them appropriately to management, as well as comply with the regulations and policies of the State.