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Last updated: Tuesday, September 26, 2017

 

Corporate Governance towards Sustainable Development

Posted: Wednesday, August 16, 2017

Sustainability is no longer an ambiguous concept but it is closely tied to each activity of the business. Wherein, corporate governance is defined as a core element to ensure effective growth and long-term sustainable development for each business.

According to a report released by the Vietnam Chamber of Commerce and Industry (VCCI), in 2014, the medium score of corporate governance in Vietnam was 35.1, much lower than that in Thailand (84.5), Malaysia (75.2), Singapore (70.7) or Indonesia (57.3). In 2015, Vietnam had no presence in the Top 50 best-governed listed companies in ASEAN. This included only listed companies - more advanced ones in the economy. And, if unlisted companies were taken into account, the picture of corporate governance would have been worse.

Explaining this reality, Mr Phan Duc Hieu, Vice Chairman of the Central Institute for Economic Management (CIEM), said, the first and foremost reason lies in the perception and low awareness of businesses about roles and importance of corporate governance. Even though many are operating without a corporate charter or corporate governance code. This is the reason for the inversion of corporate development scale to corporate governance level. If an expanding company is badly governed, its operations will not be sustainable. At the same time, they will never be the apple of the eye of foreign investors when they consider investment.

In fact, corporate governance plays a very important role in sustainable corporate development. Accordingly, good corporate governance will help mobilise capital easily and particularly help solve disputes within the company.

Sharing this opinion, Mr Vu Chi Dung, Director of the International Cooperation Department under the State Securities Commission of Vietnam (SSC), said, good corporate governance will attract investment and improve business operations. Nevertheless, despite a relatively long development time, the concept of corporate governance is still very new to many business leaders, who confuse corporate governance with operational management.

The above analyses show the importance of corporate governance to the development and growth of any enterprise, especially those that pursue the path to sustainable development.

In order to help businesses to work out a development roadmap towards long-term sustainability, the Vietnam Business Council for Sustainable Development (VBCSD) under the Vietnam Chamber of Commerce and Industry (VCCI) has developed and launched the Corporate Sustainability Index (CSI), which is proven to be easy-to-use and easy-to-apply for all businesses regardless of their ownership type, size or scope of operation. The self-assessment bases on 151 social, economic and environmental criteria of the CSI is an opportunity for enterprises to review their overall strategy and business operations, helping them identify risks as well as discover new development opportunities and potentials for timely adjustments in line with sustainable development orientations.

From that perspective, the CSI is designed as a mirror of their competencies and to enable them to measure sustainable development efforts and manage operating risks. It also helps improve their awareness of new business opportunities and new development trends, decentralise accountability, and better their management system to gradually boost operational efficiency. It also helps enhance their transparency - a way to increase the trust and knowledge of their true value for stakeholders. The index helps policymakers and authorities to develop and apply appropriate institutions to guide and support businesses to achieve sustainability as well as make sustainability reports.

When using this index, companies will have many benefits: Corporate governance will be raised to a more professional level; corporate responsibility is defined not only in economic aspect, but also in society, labour relations, corruption resistance and governance transparency. With a solid corporate governance platform through the effective use of such tools as CSI, companies will have another passport to integrate with the region and the world.

Mr Dao Dinh Thi, President of the Board of Directors of Baoviet Holdings and Vice President of VBCSD, said, “The launch of the CSI Index has provided a common benchmark for Vietnamese companies and is an important step towards creating a common voice for the business community of Vietnam on sustainable development.”

As part of a series of sustainable development promotion activities in Vietnam, the Vietnam Business Council for Sustainable Development (VBCSD) under the Vietnam Chamber of Commerce and Industry (VCCI) has cooperated with Deloitte Vietnam Company to open a training course on “Building corporate sustainability orientation and supporting tools” on August 16, 2017 in Ho Chi Minh City.








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