Sustainable Corporate Governance: Opportunities for Businesses to Develop in New Context

Sustainable corporate governance is no longer a responsibility but has become a factor for businesses to maintain business operations in the new context.

Sustainable corporate governance and business assessment practices based on the ESG (Environmental, Social, and Governance) framework are emerging as a guiding trend for investment on a global scale. In the post-pandemic context, more and more businesses are approaching ESG standards.

At the symposium "Accelerating Mindset and System Transformation to Optimize Sustainable Corporate Governance" recently organized by the Vietnam Business Council for Sustainable Development-VBCSD (Vietnam Chamber of Commerce and Industry -VCCI), Vice President of VCCI and Chairman of VBCSD Nguyen Quang Vinh, said that non-financial factors like ESG have great financial significance for an investment company. According to ESG, in other words, an enterprise that invests in scientific and professional corporate governance is a commitment to sustainable development and will surely reap benefits in all aspects in the long term.

VBCSD said that a special report on measuring the Edelman confidence index found that up to 88% of investors believe that companies that focus on ESG initiatives will offer better long-term profit opportunities than those that don't.

Ms. Do Hoang Anh, Legal and External Affairs Director of British American Tobacco (BAT) East Asia, shared that ESG is now integrated in all business activities of BAT, which has created common values for consumers, employees, communities and stakeholders.

“Through the goals of being carbon neutral, using renewable energy, saving water and maintaining zero waste in landfills while recycling waste and using sustainable sources, the company contributes in efforts to combat climate change, conserve biodiversity and plant forests,” said Ms. Hoang Anh.

From 2016 up to now, VCCI with its core as VBCSD has actively promoted sustainable corporate governance practices in the business community through the introduction to businesses of the Corporate Sustainability Index (CSI) and organized the Program on Benchmarking and Announcing Sustainable Companies in Vietnam.

Currently, the application of ESG is still new in Vietnam. However, more and more businesses are interested in ESG practices. Chairwoman of the Board of Directors of Deloitte Vietnam Ha Thi Thu Thanh said that consumers, regulators and investors are the main drivers of this process.

“Integrating ESG is a challenging topic, but once the Government has committed to net emissions, ESG is no longer a responsibility, but a factor to maintain business continuity and is an opportunity for sustainable development of enterprises in the new context. This is not only the story of public companies and listed companies, but also of all businesses,” said Ms. Ha Thi Thu Thanh.

However, Mr. Joe Phelan, Asia Pacific Executive Director of the World Business Council for Sustainable Development (WBCSD), said that businesses are having difficulty identifying risks. ESG risk in annual risk management, even though this indicator has been included in the annual sustainability report.

For risk management, the representative of WBCSD proposed a new three-line model. Accordingly, ESG is integrated through three main pillars: Governance (including the development of governance and reporting mechanisms under the ESG framework, close engagement with stakeholders); management (including developing a multi-resource approach, assessing intrinsic ESG risk and monitoring ESG data/reporting) and finally, internal audit (control and assurance of the accuracy of ESG data in the enterprise, promoting reporting on economic and social impacts of enterprises according to the ESG framework, and closely interacting with the other two pillars).

Corporate strategy consultant Do Thanh Nam emphasized, sustainable corporate governance is an indispensable need of businesses toward long-term and sustainable development, but to practice ESG as well as corporate governance effectively, requires investment and especially a comprehensive mindset change from business leaders. Business leaders must have faith and must commit to action, the sustainable development of the business must create value, and bring good to society.

By Giang Tu, Vietnam Business Forum