Corporate Governance toward Sustainability

Many entrepreneurs and enterprises now not only attach importance to economic growth, but also focus on sustainable corporate governance.

New governance paradigm

The concept of sustainability is not only about environment but also about three key factors: Environmental, Social and Governance (ESG). According to experts, many businesses presently think that sustainable development is about environmental factors (E) like reducing emissions or using renewable energy or further to social factors (S) like keeping safety, security and health of consumers and a good workplace for employees. But, the governance factor (G) is least mentioned, although it is one of most important solutions that companies can use and make positive impacts on for themselves and for the market.

Dr. Vu Tien Loc, President of the Vietnam Chamber of Commerce and Industry (VCCI) and Chairman of the Vietnam Business Council for Sustainable Development (VBCSD), said the current corporate governance model has substantially changed, not a top-down model but a network model where all members of the business have an important role to play and the ability to influence each other. For that reason, corporate governance must be implemented in a methodical, professional and flexible manner.

Mr. Binu Jacob, General Director of Nestle Vietnam, Co-Chair of VBCSD, shared about how Nestle Vietnam managed its business against the Covid-19 pandemic crisis. Nestle set up a 5+1 STORM strategy with top priorities: Safety for employees, supply optimization, distribution optimization, flexible interaction with consumers, cooperation with the Government and community, and financial capacity management.

In the face of a serious Covid-19 pandemic crisis, VCCI has actively collaborated with Deloitte Vietnam to research and draft a Handbook on Response, Recovery and Development for business during and after the crisis.

Ms. Ha Thi Thu Thanh, Chairwoman of the Board of Members of Deloitte Vietnam, said that the handbook outlines basic principles that businesses need to comply with in a crisis. These principles are summarized by Deloitte after 175 years of supporting customers through many crises, wars or great recessions on a global and regional scale.

VBCSD-VCCI has developed and introduced the Corporate Sustainability Index (CSI) to the business community since 2016 in the framework of the Program on Benchmarking and Ranking Sustainable Businesses to provide sustainable corporate governance tools for businesses.

Improving corporate governance

Based on opinions collected from hundreds of businesses, VBCSD-VCCI has made many recommendations to help businesses improve sustainable governance. VBCSD has proposed the Government develop and implement a project to enhance sustainable corporate governance capacity in the 2021-2025 period, with main contents of raising awareness and training ESG integration into business strategy for businesses, making sustainability reporting and integrated sustainability reporting (integrating the sustainability strategy into Business Strategy); scaling up the Corporate Sustainability Index (CSI) application in the business community; carrying out business integrity; and improving digital transformation, risk management, and supply management for businesses.

According to VBCSD, the Government should consider issuing policies on sustainability reporting for enterprises, including requirements for information disclosure, reporting mandatory contents to bringing sustainability reporting to a larger number of businesses to help businesses to grasp the benefits of sustainability reporting in sharpening their competitive advantages and issuing policies on CSI application in reporting and building corporate sustainability strategies.

VBCSD has recommended businesses focus on restructuring and corporate governance toward sustainability; adopt innovative business thinking, carry out an integrated sustainability approach in corporate governance; and establish a division in charge of sustainable development, conduct sustainability reporting and apply CSI to corporate governance.

Source: Vietnam Business Forum