HO CHI MINH CITY, VIETNAM, October 22, 2024 – Ho Chi Minh City is set to host discussions this week on the European Green Deal, as businesses in Vietnam brace for the implications of new EU regulations on sustainability. According to Vietnam Investment Review, Dženeta Mulabegović, a private sector engagement specialist at the United Nations Development Programme, has highlighted the potential impact on Vietnamese businesses linked to the EU market.
The European Chamber of Commerce will be hosting the Green Economy Forum & Exhibition, where the focus will be on how Vietnam can navigate the EU’s Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CS3D). These directives form a critical part of the European Green Deal, which aims to strengthen sustainability and prevent market loopholes.
The CSRD, already in effect, mandates businesses to adopt comprehensive ESG (environmental, social, and governance) policies and report their sustainability efforts alongside their financial results. This includes a ‘double materiality’ approach, meaning companies must report not only on financial outcomes but also on their environmental and social impacts. Vietnamese companies, particularly those in the EU supply chain, may struggle to meet the complex reporting requirements, especially in relation to indirect emissions (Scope 3).
Meanwhile, the CS3D, expected to come into effect in 2027, places legal obligations on companies to monitor and mitigate social and environmental risks within their supply chains. The directive also allows for civil liability, enabling individuals affected by supply chain violations to seek compensation. With both directives applying to EU companies and their global partners, many Vietnamese businesses will need to adapt their processes to remain competitive in the European market.
The impact of these directives will be significant for Vietnam’s export and investment landscape. With sustainability and responsible business practices becoming crucial for market access, Vietnamese firms must strengthen their ESG capabilities. Investors from the EU are expected to prioritise businesses that demonstrate strong ESG performance and transparency, adding further pressure on companies to align with these directives.
Vietnam is already advancing its own sustainability initiatives, such as the National Green Growth Strategy and the ESG Initiative led by the Ministry of Planning and Investment. However, aligning with the EU’s directives will require stronger cooperation between government agencies and a comprehensive national programme to boost awareness, capacity-building, and sustainable financing for businesses.
The discussions in Ho Chi Minh City come at a critical moment for Vietnam as it seeks to maintain its position in European supply chains while contributing to its own green transition.