In Vietnam, ESG - short for Environmental, Social, and Governance, is often misunderstood or conflated with traditional Corporate Social Responsibility (CSR). This confusion can lead to superficial "greenwashing" efforts that lack genuine impact.
This article aims to clarify:
- What ESG truly entails
- How ESG differs from CSR
- The three ESG pillars and their relevance in Vietnam
- The benefits of integrating ESG into business management
I. What Is ESG?
ESG represents a global framework for evaluating a company's sustainability and ethical impact across three core dimensions:
- Environmental (E): Evaluates a company's environmental footprint, including greenhouse gas emissions, energy and resource usage, waste management, and strategies towards achieving Net Zero.
- Social (S): Assesses how a company manages relationships with employees, suppliers, customers, and communities, focusing on labour practices, diversity and inclusion, and community engagement.
- Governance (G): Examines corporate governance structures, transparency, ethical conduct, risk management, and decision-making processes.
II. ESG vs CSR: Understanding the Difference
While both ESG and relate to corporate responsibility, they differ fundamentally: While ESG and CSR (Corporate Social Responsibility) both address corporate responsibility, they differ in scope and approach:
Criteria | CSR (Traditional) | ESG (Modern) |
|---|---|---|
Objective | Brand image enhancement | Long-term performance and risk assessment |
Scope | Isolated philanthropic activities | Integrated into overall operations and strategy |
Stakeholders | Community, customers | Investors, shareholders, management, supply chain |
Measurement | Qualitative, often anecdotal | Quantitative KPIs aligned with standards like GRI, ISSB, TCFD, SASB |
III. The Three Pillars of ESG with prominent issues in Vietnam
1. Environmental
When discussing ESG, the "E" pillar – Environmental is often the starting point but also poses the greatest challenge. Most Vietnamese businesses face many limitations in practicing environmental criteria.
According to the ESG Vietnam 2025 report by MCG Group, there are 4 common weaknesses. Each factor is not only an evaluation criterion but also a part of the long-term strategy towards Net Zero, green transition, and substantial sustainable development.
1.1. Greenhouse Gas Emissions
Greenhouse gas (GHG) emissions are a key indicator within the environmental criteria group of ESG. However, according to the MCG report, up to 61% of businesses do not mention any emission reduction plans in any of their public disclosures. Even among the remaining 21%, most only go as far as stating that they “have a policy,” without specifying any concrete targets or timelines.
Given that Vietnam has committed at COP26 to achieve Net Zero by 2050 and to cut emissions by 43.5% by 2030, the slow adoption of measurement tools such as carbon footprints or the lack of disclosure in ESG reports, is a significant drawback in the eyes of investors and regulators.
The absence of transparent data and a clear roadmap for emission reductions can also hinder businesses from accessing “green credits” or tapping into the rapidly growing pool of sustainable investment globally.
Companies should begin by measuring emissions across all three scopes (Scope 1, 2, and 3) and developing a well-defined reduction plan.
1.2. Climate Change Risks
Climate change is no longer an abstract concept. The rapid increase in global greenhouse gas emissions is driving natural disaster risks, such as droughts, floods, and storms and causing disruptions in global supply chains.
According to the MCG report, 58% of businesses do not mention any risks or opportunities related to climate change in their reports. This indicates a persistent misconception of ESG as merely “environmental protection,” whereas climate change is an inseparable element of modern corporate risk management strategies.
International standards like the TCFD (Task Force on Climate-related Financial Disclosures) recommend that companies conduct climate scenario analyses, assess risks from natural disasters and supply chain disruptions, and evaluate the impact on production costs. These assessments should be integrated into medium and long-term ESG strategies to enhance transparency and global integration.
1.3. Water Management
Despite being a critically important resource, water remains significantly overlooked. According to the MCG report, 79% of businesses do not provide any data related to water sources, usage volume, or recycling capabilities. ESG scores on this criterion are notably low, highlighting the seriousness of this neglect.
Amid rising water scarcity, businesses must implement water circulation systems, monitor consumption by department, and most importantly - transparently disclose water data in their annual ESG reports.
This also presents an opportunity for small and medium enterprises to make modest investments that yield substantial impact, such as installing water-saving toilets or using rainwater for irrigation at outdoor events.
1.4. Waste and Materials
Recycling rates are among the easiest ESG factors to improve, yet they are often overlooked, leading to wasted costs and the risk of being rated poorly in global ESG assessments.
In reality, businesses that adopt circular economy principles and implement effective waste management can reduce operational expenses and generate new value from waste.
According to the Ministry of Natural Resources and Environment (2023), a full transition to a circular economy could boost Vietnam’s GDP by 1–2% annually through recycling initiatives and the use of circular materials.
Immediate actions businesses can take include:
- Sorting and measuring waste at the source
- Minimizing plastic packaging and replacing it with eco-friendly materials such as FSC-certified products
- Reusing materials in regular operations—especially in short-term industries like events and exhibitions
See also: Green Materials In Event Decoration
2. Social – Society
In the ESG framework, the Social pillar is often undervalued compared to the Environmental factor. However, it is actually one of the most difficult components to build, measure, and maintain in a company's sustainability strategy.
The "S" pillar is not merely about complying with basic legal requirements such as the Labor Code regarding workers' rights, occupational safety, or gender equality.
Instead, according to international ESG standards (like GRI and SASB), a company with a high “S” score must demonstrate that it not only fulfills legal obligations but also proactively fosters a humane ecosystem.
In such an ecosystem, employees are respected, community voices are heard, and social rights are protected—creating long-lasting value that goes far beyond traditional philanthropy or CSR (Corporate Social Responsibility) activities.
To achieve this, businesses should focus on the following core aspects:
2.1. Human Rights and Working Conditions
A sustainable business cannot thrive in a toxic work environment. The Social pillar in ESG highly values organizations that:
- Ensure occupational safety and basic employee welfare
- Maintain transparency in wage, bonus, and working hour policies
- Provide channels for employee feedback and fair grievance handling mechanisms
However, businesses don’t have to be large to begin improving their "S" score. Creating green workspaces with natural lighting, reducing psychological pressure, or encouraging employees to propose ESG initiatives are all steps in the right direction.
2.2. Diversity, Equity, and Inclusion (DEI)
Diversity, Equity, and Inclusion are becoming global benchmarks in ESG evaluations. While not yet widespread in Vietnam, DEI is an essential trend for businesses entering global supply chains or seeking ESG-focused investors.
According to the MCG report, female leadership representation is not only a matter of gender equality, it also positively influences a company's ESG performance. This proves that DEI is more than a moral value; it delivers practical and sustainable benefits for businesses.
Implementing DEI doesn’t mean adopting rigid, one-size-fits-all policies. Businesses can:
- Commit to non-discrimination based on gender, age, or region
- Create job opportunities for disadvantaged groups
- Host activities that promote cross-cultural engagement
More importantly, DEI must be consistent across policy, practice, and actual company culture—not just a PR exercise.
2.3. Community Engagement and Social Impact
Businesses do not operate in isolation—they are an integral part of the communities they serve. The "S" pillar extends beyond internal operations to include relationships with customers, suppliers, and especially the local community.
A 2022 report by the Edelman Trust Barometer found that 74% of consumers expect brands to take greater action in addressing social issues (Source: Edelman Trust Barometer 2022).
Instead of isolated acts of charity, ESG encourages companies to:
- Partner with social organizations on long-term initiatives
- Develop products/services with clear social value
- Promote sustainable consumption through education and communication
2.4. Responsible Supply Chain
A company cannot achieve a high ESG rating if its supply chain is involved in labor violations (e.g., child labor, unsafe working conditions), environmental harm, or exploitation at any level.
Key criteria for evaluating a responsible supply chain include:
- Periodic supplier audits covering labor, environmental, and ethical standards
- Requiring suppliers to sign ethics and environmental commitment clauses in contracts
- Enforcing exclusion policies for suppliers with serious ESG violations
At a foundational level, Vietnamese businesses can start by creating a “Supplier Code of Conduct” and integrating it into commercial contracts.
3. Governance
If the “Environment” pillar is about looking outward, and “Social” concerns interaction with people, then “Governance” is the internal core that enables ESG to become a long-term strategy rather than a short-term slogan.
ESG governance in Vietnam is still in its early stages, with several key challenges, including:
3.1. Board Structure and ESG Oversight
One of the core elements of the “G” criterion is the Board of Directors (BoD) and an independent ESG oversight mechanism. A significant challenge lies in the limited ESG capacity of the Board.
According to MCG statistics, only 25% of small enterprises and 40% of large enterprises have a Board involved in ESG activities, revealing a substantial gap in integrating ESG into governance systems. Only 29% of Vietnamese companies expressed confidence in their Board’s ESG knowledge—a figure notably lower than the global average (approximately 45%).
These figures indicate that ESG governance structures in most companies are still in the formative stage.
International standards suggest:
- The Board should include members responsible for ESG or have an ESG subcommittee
- ESG should be a regular agenda item in strategic/quarterly meetings
- ESG outcomes should be linked to leadership KPIs and compensation
Refer to the World Economic Forum for additional factors to ensure the “G” in ESG is fully represented in evaluation and reporting frameworks.
3.2. ESG Transparency and Reporting
In modern governance, transparency is the foundation for building trust. This is particularly true for ESG, where environmental, social, and governance data must be disclosed clearly, timely, and in accordance with standards.
In Vietnam, starting in 2024, some stock exchanges have required listed companies to publish ESG reports or integrate ESG content into their sustainability reports. While not yet mandatory for SMEs, early preparation will help organizations stay proactive as regulations tighten.
A high-quality ESG report typically includes:
- Quantitative indicators (KPIs)
- Annual goals and results
- Key ESG risks and corporate responses
- Reference frameworks (GRI, SASB, TCFD, etc.)
Amid growing international integration and commitments such as EVFTA and COP26, proactively enhancing the “G” factor, strengthening ESG knowledge training for staff, and integrating ESG as an inseparable part of development strategy will help Vietnamese enterprises improve their long-term competitiveness.
IV. Benefits of Implementing ESG
Businesses that lead in implementing ESG not only achieve commercial success but also generate lasting positive impacts on society and the environment.
- Enhanced Risk Management: By assessing and managing ESG factors, businesses can identify and mitigate potential risks, thereby protecting their assets and corporate value. For instance, a company with a solid environmental protection strategy is less likely to be affected by increasingly strict environmental regulations.
- Improved Image and Reputation: Companies with a clear and transparent ESG strategy are recognized as responsible entities, which helps build trust among customers, employees, and the community.
- Attracting Investment: Investors are increasingly prioritizing companies with strong ESG performance. Focusing on ESG can help businesses attract capital from sustainable investment funds and responsible investors. For example, BlackRock, one of the world's largest asset management firms, has declared that ESG factors will play a significant role in their investment decisions.
- Boosted Performance and Innovation: ESG-focused businesses often cultivate more positive and creative work environments, leading to improved performance and the development of breakthrough business solutions. For example, Google has heavily invested in renewable energy projects and fostered a friendly working environment, which in turn drives creativity and innovation within the company.
V. Conclusion
The three pillars of environment, society, and governance are not merely a trend—they are a key factor in shaping the future of businesses.
In an era where environmental and social challenges are increasingly pressing, understanding what ESG is and focusing on it will be the key for businesses to survive and grow sustainably in the future.
Businesses that lead in implementing ESG will not only achieve commercial success but also generate long-lasting, positive impacts on society and the environment.
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