Spearheading ESG

By Frank-Jürgen Richter

April 18, 2024

In recent years, businesses across the globe have recognized the importance of environmental, social, and governance (ESG) principles in shaping their investment strategies. As the world grapples with climate change, resource scarcity, and social inequality, companies are increasingly realizing that sustainable practices are not just a moral imperative but also a strategic necessity.

Across industries, geographical regions, and company scales, organizations have significantly increased their focus on enhancing ESG practices. Currently, over 90% of S&P 500 companies release ESG reports in various formats, while approximately 70% of Russell 1000 companies also engage in ESG reporting. Furthermore, several jurisdictions are actively discussing or implementing mandatory ESG reporting requirements. These efforts reflect the growing recognition of ESG factors as critical components of responsible and sustainable business practices.

ESG reporting has become a mandatory requirement for listed companies in Vietnam. Since 2016, publicly listed Vietnamese companies have been required to submit ESG reports. The latest circular, implemented in 2021, reinforces this obligation, making sustainability reporting a standard practice. Furthermore, 80% of Vietnamese companies have either made ESG commitments or have plans to do so soon. The Vietnamese government has actively promoted ESG-related practices. At the 2021 United Nations Climate Change Conference (COP26), Vietnam announced significant climate-action commitments, emphasizing the transition to carbon neutrality.

China’s three major stock markets—the Shanghai Stock Exchange (SSE), Shenzhen Stock Exchange (SZSE), and Science and Technology Innovation Board (STAR Market)—have announced new sustainability reporting guidelines. These guidelines mandate hundreds of larger-cap and dual-listed issuers to begin mandatory ESG disclosure on a wide range of topics including governance, strategy, impact, risk and opportunity management, and indicators and goals by 2026.

Innovative Business Models

Businesses need to innovate their business models to ensure they align with ESG guidelines and contribute to the greater good. 

Embrace Transparency and Sustainability

Ensuring robust reporting standards is crucial for fostering transparency and accountability within organizations. By providing clear and comprehensive information about their ESG practices, companies can attract conscious investors and gain access to capital. Moreover, transparency cultivates trust among stakeholders, reinforcing the company’s commitment to responsible business conduct.

In light of the EU’s Carbon Border Adjustment Mechanism (CBAM), Asian economies face a pressing need to enhance their energy efficiency, reduce emissions, and establish domestic carbon pricing mechanisms. While the initial impact on Asian markets may be limited, CBAM could signify a significant shift in both emissions’ reduction strategies and global trade dynamics. Companies in the region must proactively align with ESG principles and adapt to these evolving regulatory landscapes to thrive sustainably in the long term.

Leverage Transformational Technologies

Investing in data analytics and digital technologies can revolutionize ESG practices. By leveraging data, firms can measure their environmental impact, monitor progress towards decarbonization goals, and optimize resource usage. These technologies also enable better risk assessment and informed decision-making.

Chinese companies have been increasingly leveraging data to address their ESG commitments. A positive trend of voluntary ESG reporting has emerged in China. Over 250 of China’s 300 largest companies listed on the Shanghai stock exchange now publish ESG data as part of their annual reports. In total, more than 1,000 companies on the Shanghai exchange release yearly ESG reports.

Reimagine Business Models

Beyond gate-to-gate approaches, firms must focus on their entire value chain. Collaborating with stakeholders, addressing fair wages, community development, and human rights, and prioritizing waste management for resource efficiency are critical steps. By doing so, businesses can enhance their brand image, attract conscious consumers, and contribute to a more sustainable future.

Fair wages are increasingly becoming a factor in consumer decision-making. A survey conducted in Vietnam revealed that the majority of respondents expressed an intention to support businesses that pay their employees fairly.

Collaborate for Collective Action

ESG transformation requires collective effort. Engaging with stakeholders, advocating for policy change, and participating in industry initiatives are essential. By collaborating with peers, governments, and civil society, Chinese and Vietnamese firms can amplify their impact and contribute to a more eco-conscious world.

In keeping with this approach, Horasis organized its 2024 Horasis China Meeting in Binh Duong, Vietnam over 14-15 April 2024, which has just concluded successfully. The meeting brought together 300 of the most senior members of the Horasis Visions Community, including some of China’s and Vietnam’s best known business leaders, facilitating discussions around the rapidly expanding trade and investment between the two countries.

Spearheading ESG is not just about compliance; it’s about creating a legacy of positive impact. Businesses have a unique opportunity to innovate, lead, and serve the greater good by integrating sustainability into their core business strategies. Let us embrace this challenge and build a more resilient and equitable future for all.

Photo: Organizations are realizing that following ESG principles are both necessary and profitable in the long run.