In the context of the global economy being overwhelmed by the negative impacts of the tariff war from the Donald Trump administration and recently the European Commission also proposed to simplify and postpone the progress of the requirement for sustainable development reporting of enterprises, many people think that there is no need to care about sustainable development reporting. Is this a wise choice for Vietnamese enterprises in the race to gain a position in the global supply chain and develop prosperity?
This article analyzes the nature of sustainability reporting and outlines the motivations and benefits for businesses when embarking on implementing and incorporating sustainable development actions into their business strategies.
I remember a saying, we are defeated not because our opponents are better than us, but because we do not change or do not change in time with the changes of life and the market. This lesson is always true in all circumstances, times and especially when the world out there is also changing unpredictably.
1. Responding to external demands
Compliance with international trade policies and regulations: Major markets such as the EU, the US, and Japan are increasingly tightening ESG standards. For example, the EU’s Carbon Border Adjustment Mechanism (CBAM) requires exporting companies to be transparent about their greenhouse gas emissions. This encourages companies to build emission inventories and reporting systems according to international standards.
Mitigating financial and regulatory risks: Financial institutions are incorporating ESG into their lending and investment criteria. Businesses that fail to comply may lose access to capital or face higher interest rates due to perceived risk. Additionally, ESG non-compliance can lead to fines, litigation, or reputational damage from public criticism.
2. Meet stakeholder expectations
ESG is increasingly being addressed not only by governments and financial institutions, but also by customers, investors and communities. Businesses proactively meeting stakeholder expectations will help improve competitiveness and build trust.
According to the US Bureau of Labor Statistics, modern consumers, especially Millennials and Gen Z (accounting for more than 50% of the global population), prioritize choosing products and services from companies that are environmentally and socially responsible. Brands that effectively apply ESG not only improve their image but also build customer loyalty.
Attracting sustainable capital: ESG funds are growing, with trillions of dollars being invested in companies with sustainable development strategies. This creates opportunities for businesses to scale, grow over the long term, and benefit from a lower cost of capital.
Improved relations with communities and governments: Businesses with a well-structured ESG strategy often receive support from local authorities, making it easier for them to expand operations, access resources, or receive preferential treatment in government support programs.
3. Proactively innovate to improve operational efficiency
ESG is not only an external requirement but also a driving force for businesses to restructure and improve operational performance. When implemented properly, ESG helps optimize costs, improve productivity and create long-term competitive advantages.
Optimize costs through green technology: Businesses can save millions of dollars each year by improving energy efficiency, reducing water consumption, better managing waste, or using renewable energy. For example, manufacturing companies can invest in water recirculation systems or solar power to reduce operating costs.
Increased employee productivity and satisfaction: A friendly, equitable and sustainable working environment helps retain good employees and improve labor productivity. Many studies show that businesses with good ESG policies have higher levels of employee satisfaction, leading to continuous creativity and innovation.
Expanding markets and business opportunities: As ESG becomes a mandatory criterion in global supply chains, businesses that take the initiative will have an advantage in signing contracts with multinational corporations. Additionally, investing in sustainable products and services can help businesses explore new market segments.
ESG integration is not only a response to external pressure but also helps businesses build a foundation for sustainable development from within. When businesses have a strong ESG strategy, they not only increase their competitive advantage but also ensure stable development in the long term.
Improving corporate governance: ESG requires businesses to be more transparent in governance, from risk management, internal control to financial and non-financial reporting. This helps reduce fraud, improve management efficiency and build a more professional corporate culture.
Building a long-term growth strategy: Businesses with a long-term vision often focus not only on short-term profits but also on investing in factors that will help them maintain their leadership position for decades. ESG plays a key role in shaping these strategies, from innovating business models to collaborating with sustainable partners.
Creating a driving force for continuous improvement: ESG-compliant businesses tend to continuously innovate to meet higher standards, thereby enhancing their competitiveness. Pioneering companies in this field not only ensure sustainable development but also lay the foundation for major breakthroughs in the future.
Conclusion
Choosing the right ESG goals not only helps businesses meet external requirements but also brings important internal benefits. By proactively applying ESG, businesses can minimize risks, optimize costs, expand business opportunities and build a solid development foundation. In the context of the global market increasingly paying attention to ESG, businesses that know how to take advantage of this opportunity will have a great competitive advantage and sustainable development in the long term.