Sustainability Is the Core of All Business Operations

The post Covid-19 pandemic world will be the world of economic restructuring and business restructuring toward sustainable values. Sustainability is designed to deliver fundamental values that help national development. Vietnam Business Forum has an interview with 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), about sustainability in business.

You once said that the matter for every enterprise now is “To be or not to be - To develop sustainably or to be left behind”. What benefits does a business get from sustainable development?

Never in the history of mankind have we seen the world change as much and quickly as it is now. Society is constantly changing, requiring every government, every economy, and every business to keep moving on with innovation to catch up with the pace of evolution. In that cycle, there is only one form of development that is globally accepted - sustainable development. A business role is indispensable in sustainable development. And, in return, the business needs sustainable development to ensure its own future.

In the traditional economy, producers exploit natural raw resources to create products and services. Then, waste from production and consumption is landfilled or even thrown into the environment.

In the circular economy, manufacturers focus on minimizing negative impacts on the environment by using innovative ways to maximize the life cycle of all used resources. In that economy, sustainable development is applied to production and business activities.

Sustainable development must balance three pillars of economic growth, environmental protection, and social progress and equity. Every planning, investment project or policy among other factors must have a positive impact on these three pillars.

To achieve sustainable development, the business must, first of all, operate responsibly in tune with global principles and have socially supporting actions. In addition, it must make a highest commitment, make annual reports on its efforts, and engage in activities in localities where it does business.

Given the current context of intensive integration and constant competition, it must create its own advantages and grow its business capabilities. It will be successful when it builds a business model that delivers lasting values to the community, adopts an innovative business vision and strategy, and is operated by devoted employees who are placed in the right position to bring their competences into full play.

After being recognized to be sustainably developed, the business will have a higher reputation, affirm its brand value and open up new business opportunities due to increased trust from partners, investors and shareholders. It will find it easier to attract human resources, improve competitiveness and develop the green economy.

In fact, sustainable development has helped the business to efficiently tap natural resources, use energy reasonably and move toward clean energy and renewable energy. This helps it optimize costs, limit systemic factors of environmental protection and many social issues that affect businesses.

Every business needs sustainable development and a balance of economic benefits, social development and environmental protection in the long term to control the domestic market, gain a higher standing on the international playing field and take advantage of opportunities from major FTAs. Every country needs a strong business community to be resilient, self-reliant and free.

Sustainable corporate governance is now a universal requirement and businesses can only succeed when they build a business model that brings lasting value to the community. Would you tell us about VCCI's support for enterprises to adopt sustainable corporate governance, especially in the current context of strong integration?

Fostering quality and effective growth of private businesses, creating a solid foundation for rapid and sustainable socioeconomic development is an important approach defined by the Government in Decision 1362/QD-TTg dated October 11, 2019 on sustainable private business development plan to 2025, with a vision to 2030. The foundation for a sustainable business is corporate governance. The better corporate governance capacity, the better the enterprise can respond, cope with and recover in crisis, seize business opportunities, and enhance its competitiveness to avoid being left behind.

What do businesses need to do to survive and compete on a more competitive playing field when Vietnam joins more major free trade agreements (such as CPTPP, EVFTA and RCEP)? These FTAs not only open up many opportunities for them, but also have great significance for economic security of the country because FTAs help Vietnam diversify markets and reduce overdependence on a given market. Opportunities always come with challenges. The most obvious challenge is how hundreds of thousands of Vietnamese businesses can enhance their competitiveness, elevate themselves to participate more deeply in high-value supply chains run by international corporations to effectively and thoroughly capture and utilize FTAs to which Vietnam is a member. There are many solutions to that question, but the most important is that enterprises need sustainable development and they need a professional management foundation to achieve sustainable development.

Accordingly, they need to establish appropriate structures, ensure clarity and stability when the market is unstable and turbulent. Sustainable development must be seen as the core of every business activity, an investment for responsible growth, not a cost they pay. Leadership commitment is a key factor.

Raising awareness of the business community about corporate governance and helping SMEs with access to good governance practices and models are VCCI's goals for years.

VBCSD concretized its efforts to promote sustainable corporate governance by developing the Corporate Sustainability Index (CSI). CSI is a superior corporate governance tool that sets essential indicators in social, economic and environmental fields that any business needs to grasp and implement. With more than 90% of Vietnamese companies being small and medium in size and falling short of resources, CSI is a powerful “right hand man” for Vietnamese businesses to figure out their strong points and weak points of business operations to make timely adjustments.

In the fifth year of deployment, CSI has been applied by many companies. Many domestic and FDI firms have achieved very good results in corporate governance.

In addition, VCCI has cooperated with Deloitte Vietnam to compile a handbook for business response, recovery and development during and after a crisis. The handbook can help them access advanced and effective governance principles and methods so that they can proactively fend off, endure, and turn risks into opportunities, not only regarding Covid-19, but also other challenges in the future, for sustainable development.

What are obstacles when Vietnamese enterprises move towards sustainable development, and how can they make an effective sustainability report?

Sustainable development is not an easy way to go. It requires persistence and enormous effort from the leadership to every staff member. For the Vietnamese business community, where more than 90% are SMEs, challenges lie in many factors. Besides insufficient finance, insufficient human resources and weak ability to access and apply technology and innovations, the legal environment is still incomplete to provide favorable conditions for them to access preferential credit sources and adopt new business models toward sustainable development.

In addition, awareness of sustainability reporting is also a matter of concern. Nondisclosure or limited disclosure of nonfinancial information as performance indicators may reduce their ability to access capital. Moreover, if they lack accountability for sustainable development issues, they will not be able to maximize their competitive advantages and face risks of losing customers and the trust of stakeholders.

They need to assess the governance gap and establish a sustainable development integration strategy, consider investing in resources to improve governance capacity, and gradually approach international standards and practices. They need to focus on data quality, process and control to create a meaningful sustainability report for stakeholders. At the same time, they need to keep updated on new trends and regulations to ensure effective communication with stakeholders.

They can improve their reporting by clearly announcing their choice of the Global Reporting Initiative (GRI) Standards and announcing management methods for selected material topics. The reports may have targets for sustainable development, specific environment, medium and long term, as well as analysis of sustainable development impacts on markets and customers.

Notably, businesses need to increase informational comparability by making targets and comparing it with targets as well as comparing it with previous performance instead of just presenting data for the current year as some companies often do. Furthermore, it is advisable to consider selectively key data and have direct comparison with set targets and with local or regional industry regulations.

How to achieve the best effect of the disclosure of sustainability reports is an issue that businesses need to focus on. Currently, many businesses have published sustainability reports on their website. This is the right, reasonable and inexpensive way. In addition, businesses should also do well in communicating sustainability reporting on the mass media.

Source: Vietnam Business Forum