According to the World Economic Forum in 2023, the annual global economic cost due to climate change is projected to reach between $1.7 trillion and $3.1 trillion by 2050. For Vietnam, the World Bank’s Country Climate and Development Report for Vietnam, published in 2022, highlights that Vietnam, with over 3,200 kilometers of coastline and multiple low-lying cities and river deltas, is one of the nations most vulnerable to climate change. Rising temperatures, sea-level increases, and heightened climate volatility are already disrupting economic activities and stifling growth. The World Bank estimates that climate-related economic damages in Vietnam could account for as much as 12-14.5% of the country’s GDP annually by 2050.
A Vital Requirement for Nations and Businesses
As climate change intensifies and global commitments to reduce greenhouse gases strengthen, sustainable development has become crucial for businesses around the world. For businesses, sustainability not only fosters environmental protection and corporate social responsibility but also ensures long-term growth for both the nation and the enterprise itself.
For Vietnam, the 2021 COP26 conference marked a significant step, as Prime Minister Phạm Minh Chính joined over 140 other countries in committing to net-zero greenhouse gas emissions by 2050. While achieving net-zero emissions is an immense challenge for Vietnamese businesses, it also presents a valuable opportunity for those with the foresight and strategy to align with sustainable development goals.
According to the United Nations, “Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” While this definition appears straightforward, striking a balance between current demands and future sustainability can be complex, yet it is crucial for the long-term development of any nation, organization, or business.
Today, investors and business partners increasingly expect board members and management to be accountable for non-traditional factors such as environmental, social, and governance (ESG) issues, as well as corporate social responsibility (CSR). As a result, terms like ESG and CSR have become central to the vocabulary of many companies, signifying a shift in focus toward sustainable and responsible practices that affect both operational efficiency and future profitability.
Meeting European Standards
There are now over 600 frameworks and guidelines related to sustainable development reporting, reflecting the growing need for standardization across industries and regions. These standards are being integrated into business practices to align with global sustainability goals, particularly the Net Zero target, which aims to eliminate or offset all greenhouse gas emissions.
Moreover, simplified sustainability reporting standards tailored for small and medium-sized enterprises (SMEs) have emerged, making it easier for these businesses to participate in sustainability reporting without facing excessive costs or complex processes. Most sustainable development reporting standards now include approaches specifically designed for SMEs.
Compliance with sustainability reporting standards is increasingly critical as many countries, particularly within the European Union (EU), are implementing stringent requirements for sustainability reporting. The EU’s Corporate Sustainability Reporting Directive (CSRD), effective as of 2023, mandates that companies disclose the environmental and social impacts of their operations. This directive extends to non-EU companies with at least €150 million in revenue in the EU, and at least one branch or subsidiary within the EU. It requires these companies to follow the European Sustainability Reporting Standards (ESRS) and have their data independently verified to ensure accuracy.
Failure to comply with these reporting standards could challenge a company’s ability to maintain a presence in the EU market, impacting not only their direct operations but also their suppliers and partners across Europe. While Vietnamese businesses are currently encouraged to adopt sustainable reporting practices, they are not yet mandated to do so.
Sustainability reporting offers organizations access to high-quality green or sustainable financing options at a lower capital cost and more favorable conditions. These reports help businesses demonstrate their commitment to responsible practices, which can improve their standing with investors, customers, and regulators alike. Sustainable reporting also serves as a transparent mechanism to show stakeholders how a business is actively contributing to environmental and social goals.
With sustainability increasingly viewed as a measure of corporate credibility, reporting provides companies with a competitive edge, allowing them to attract financing from funds dedicated to green projects. This is particularly valuable as more investors seek opportunities that align with ESG principles, viewing such investments as lower-risk and more resilient in the face of regulatory and market shifts.
The movement toward sustainable development represents a shift in global business dynamics. Enterprises that prioritize sustainability are not just meeting regulatory demands; they are positioning themselves for long-term resilience and success. By proactively integrating sustainability into their operations, businesses can anticipate regulatory trends, respond to investor demands, and strengthen their market position in an increasingly eco-conscious world.
For Vietnam, embracing sustainable development aligns with both national and global environmental commitments. Vietnamese businesses can play a pivotal role in driving this shift, adopting innovative practices that reduce emissions, protect natural resources, and contribute to the well-being of communities.
In summary, sustainable development is no longer just a choice—it is a necessary strategy for resilience and growth in an era of environmental challenges. Vietnamese companies, as they adopt sustainable practices, not only support national goals but also contribute to a larger global movement toward preserving the planet for future generations.
