Sustainable corporate governance important in the new context: Experts

At a conference themed “Accelerating mindset and system transformation to optimise sustainable corporate governance” as part of the Vietnam Corporate Sustainability Forum 2022 (Photo: VietnamPlus)

Hanoi (VNA) – Sustainable corporate governance is not only an important factor for enterprises to maintain effective operations, but it also represents a chance to elevate governance in the new period, according to experts. 

According to Nguyen Thi Thu Thanh, Chairwoman of the Board of Members of Deloitte Vietnam and Vietnam Business Council for Sustainable Development (VBCSD) assessment practices based on the environmental, social, and governance (ESG) framework help enterprises sustain business continuity and sustainable corporate development.

Along with helping businesses set their targets and develop reports, sustainable corporate governance also helps enhance corporate social responsibility and sustainability, while reinforcing relations with partners, Thanh said. The event is held as a part of the Vietnam Corporate Sustainability Forum 2022, which was jointly organised by the Vietnam Chamber of Commerce and Industry and the VBCSD on September 22.

Meanwhile, Nguyen Quang Vinh, Executive Vice President of VCCI and Chair of VBCSD, said that nonfinancial factors like ESG can be financially productive as a company that invests in ESG. In other words, a company that invests for scientific and professional corporate governance, is a company that is committed to sustainable development and will surely achieve the long-term success of all aspects.

However, to practice ESG as well as effective corporate governance requires investment and, especially, a comprehensive mindset change from the top, he said.

From 2016 to date, VCCI, the core VBCSD has actively fostered sustainable corporate governance practices in the business community. It has done this by the introduction of the Corporate Sustainability Index (CSI) to businesses and the Programme on Benchmarking and Announcing Sustainable Businesses in Vietnam, he added.

Joe Phelan, Executive Director, Asia Pacific for World Business Council for Sustainable Development (WBCSD) said WBCSD's research results show that businesses are facing difficulty in identifying ESG risks in their annual risk management, even though ESG is included in their annual sustainability report.

To propose a solution for this, WBCSD introduced a new Three-Lines model, whereby ESG is integrated through three main pillars. These include the governing body (including the development of governance and reporting mechanisms under the ESG framework and attaching close stakeholder engagement). It also includes the management (including development of a multi-resource approach, substantive ESG risk assessment, and ESG reporting/data quality monitoring). And finally, it includes the Internal Audit (playing a role in controlling and assuring the accuracy of ESG data in the business, promoting reporting on economic and social impacts of the business according to the ESG framework, and closely interacting with the other two pillars).

In a representation on ESG practices sharing, Do Hoang Anh, Legal and External Affairs Director, British American Tobacco (BAT) in East Asia, underlined that it is important to be creating shared business values from ESG practices.

She said ESG is now integrated in all business activities of BAT to create common values for consumers, employees, communities and stakeholders. Through its goals of being carbon neutral, using renewable energy, saving water and maintaining zero landfilled waste in addition to waste recycling waste and using sustainable sources, BAT can contribute to efforts to combat climate change, conserve biodiversity and plant forests. BAT also ensures that there is no child labor in its supply chain in Vietnam. It provides better livelihoods for farmers, and strives to build a culture of diversity and inclusion, empowers women, and complies with international business ethics and marketing principles.

VBCSD partners with IDH Vietnam, PepsiCo Vietnam and Nestlé Vietnam to research and assess the current situations of some industrial parks in Vietnam according to the Economic - Environment - Social and Governance (EESG) Framework. The study was carried out from January to June 2022 within the framework of the Sustainable Industrial Parks Initiative - SIP. The number of implemented samples accounted for 30% of the total 397 industrial parks in operation in the country.

According to the research, the rate of policies on sustainable economic, social, environmental and corporate governance is low (only 39% have policies on environmental risk management, 10% have policies on promoting circular economy, and 13% have policies on digital transformation). Industrial parks are more concerned with risk management policies (or complying with the law) than policies that bring about sustainable development for them and other stakeholders. Among surveyed IPs, only 22% have management system certificates and 76% do not have enterprise-level audit information.

According to Pham Hoang Hai, head of VBCSD Partnerships Department, following this study, VBCSD and IDH will coordinate with members of the Initiative Steering Committee to build an Industrial Park Sustainability Index based on the ESG framework and conduct its compatibility and suitability testing in Vietnam./.