In the era that sustainable development becomes important measure for competitiveness of business, the concept of standard ESG (Environmental – Social – Governance) are increasingly being mentioned as a requirement of the weak, and not also the option form.
The article below Lac Viet Computing will help the business has comprehensive perspective and the most realistic on standard ESG, at the same time open the way to apply ESG effectively through data analysis – elements increasingly hold strategic role in the transition to green.
1. Standard ESG is what? – Holistic view for beginners
1.1. ESG is what?
Learn simple, ESG is the criteria for evaluating the performance of a business based not only on financial factors, but also on the responsibility with the environment, society and the enterprise internal management. When a business is committed to ESG clearly means that they are not only profitable, but also have responsibility and transparency towards sustainable development.
ESG is an abbreviation of three fundamental elements in the evaluation of sustainable development of a business:
- Environmental (Environment): evaluate how businesses manage the impact on the environment as greenhouse gas emissions, energy use, drain water, waste management. For example, a factory can monitor the amount of CO₂ emitted annually to apply measures to save electricity to reduce emissions.
- Social (Social): consider the way businesses interact with employees, partners and surrounding community. Include factors such as occupational safety, gender diversity, the rights of workers or community activities. A company applies a policy on maternity leave full, there are programs to support the local community, is the classic example.
- Governance (Admin): refers to the structure of internal governance, transparency in financial reporting, integrity in the management policies, prevention of fraud and corruption. A business has independent auditing publicly report financial transparency will have points of Governance is high.
ESG is not a far fetched concept or too academic. It is the measure of the level of maturity and responsibility of business in the long term.
1.2. Why ESG become the standard global importance?
Many recent studies have pointed out that the business strategy ESG, it often results in better business in the long term. According to a survey by PwC, there are up to 76% of investors are willing to refuse to pour capital if the business has no plans ESG clear.
The reason lies in the ESG help business control risk better, especially the risks non-financial environmental risks (floods, pollution), moral hazard (boycott brand), legal risks (violation of labor standards, the environment). Failure to comply with ESG may cause the business to lose the opportunity to access investment capital, was excluded from the global supply chain, or even sanctioned by the governing body.
Moreover, consumers new generation increasingly preferred choice of products of the enterprise responsible for society, environment. This creates pressure, but also an opportunity for business to locate the brand in a sustainable way.
With the business in Vietnam, the active learn deploy ESG now is not just to “keep up the trend,” which is the necessary action to seize the opportunity: access to capital, blue, maintain international cooperation, attract talent, especially the application data analysis ESG to make smarter decisions in operation management. Those businesses that take advantage of data ESG will easily find the weak points in operation and improve energy efficiency, reduce costs, enhance brand reputation in the eyes of the consumer – partner.
2. The standard ESG popular today – Businesses should choose?
Implementing ESG in business is not just a statement of commitment, which should be concretized through the standard kit to measure, track, report the results of a systematic manner. However, each standard ESG re-purpose use, the manner of deployment and the appropriate level different depending on the industry, scale, orientation, development of the business.
Here are 4 sets of standard ESG most popular today that business can refer to, together with analysis of practical value that each standard to bring:
2.1. GRI – Global Reporting Initiative: The standard comprehensive, most flexible
GRI is one of the first standards most popular in the world for reporting on sustainable development. The strong point of the GRI is the ability to cover wide with the report structure is clear and easy to understand.
Practical value for business:
- GRI helps businesses build a data frame ESG systematic, analytical support accurate assessment of the impact on the environment – social – governance.
- Flexible customized according to each industry, helping business is not restrictive when applied.
- Increased transparency in reporting, consolidate trust with partners and customers, especially the international market.
For example: A manufacturing enterprise can use GRI to report on energy consumption, the proportion of recycled raw materials, the mounting operations community as a standard format for international help in the analysis process decision became clear more consistent.
2.2. SASB – Sustainability Accounting Standards Board: Suitable for businesses interested in sustainable financing
SASB's standards are designed to focus on the relationship between the factors and sustainable financial results. Other with GRI capital comprehensive, SASB focus on the elements ESG directly affect the financial performance of the business in each industry specific.
Practical value for business:
- Help businesses identify the factors that ESG can directly affect revenue, expenses, or financial risks, thereby making the strategy effective response.
- Especially suitable for business listing, is preparing to IPO or call capital, for providing friendly approach with investment.
For example, A business in the retail sector can use SASB to measure the impact from the use of environmentally friendly packaging to logistics costs and expectations from consumers. From there, easy business data analysis ESG related to business performance, instead of just stopping in the target CSR (corporate social responsibility).
2.3. TCFD – Task Force on Climate-related Financial Disclosures: Meet the requirements of information disclosure about climate risk
TCFD is a global initiative to help companies to disclose information on risks and opportunities related to climate change in a transparent way. TCFD not only is a standard technique, but also the strategic direction to business integrated climatic factors on the decision-making process.
Practical value for business:
- Helps business identify risk analysis, physical (such as floods, drought, rising temperatures), conversion risk (the cost of compliance with policies, new climate).
- Is the essential tool to build business scenarios adapt to climate change, particularly in sectors vulnerable to the effects such as energy, agriculture, logistics.
For example, A logistics businesses can use the TCFD to assess the impact of natural disasters up the supply chain, from that analysis, weather data, planning, response, increase resilience to climate change.
2.4. The index ESG Vietnam: Base localization for strategic sustainable development
In Vietnam, the demand for standardized ESG is increasingly pronounced. Year 2022, the Commission, state securities has officially issued a Set of indicators for sustainable development VNSI, and in the near future, the criteria for ESG will be strongly integrated into the system of financial reporting – corporate governance.
Practical value for business:
- Base to meet legal requirements, regulations, upcoming avoid the risk of inspection, sanctioned or excluded from the category of public investment.
- Enhanced accessibility support programs, green from The state and the organization for international development in Vietnam.
- Help construction business roadmap ESG fit with the local context, easy to deploy, easy to measure.
For example: A manufacturing enterprise in Vietnam can use the index ESG country to deploy the evaluation of the energy consumption per unit product, combining data analysis cost, efficient energy use, in order to optimize the process operation.
3. Businesses need to prepare what to deploy standard ESG?
Deploy standard ESG is a process that requires thorough preparation, not just about strategy but also in the capacity data, personnel and technology. Especially with the business are in the process of modernization of the system, analyze the data, the approach to ESG in the direction can measure, track, improvement is the key element to achieve the real effect.
3.1. Reviews the current state of ESG of business
Before putting ESG into long-term strategy, it is necessary first is to clearly define the business now in the journey ESG. This requires a process to assess the current state system, based on specific data.
Set the system collects data ESG
Businesses need to revise the whole of the works are related to environmental, social and governance: from the amount of electricity consumed, the cost of waste management, hr policies, until the level of transparency in financial reporting. However, the key point is not located in the “note craft” which is building the system recorded data in an automatic way, the states are standardized.
For example: A manufacturing enterprise can be mounted sensors measure the power consumption for each region in the factory to collect data in real time to assess the energy consumption by each product line.
Apps, tools, data analysis, fit
To the evaluation process doesn't just stop at gather, but to create real value, businesses need to use the tools, data analysis, strong. In the early stages, Excel advanced can support fundamental analysis. However, in order to have a comprehensive view, should be combined with the platform more intensive as Power BI or the software analysis ESG features visualization of data, and automatic alerts.
The most obvious benefit is to help leaders make decisions based on data, instead of feeling – from the priority for improvements in certain stage in the production process, to reform, personnel policy or prepare for the report ESG send partners, investors.
3.2. Training team to understand and act on ESG
Implementing ESG can not be successful if only the work of a small group expertise. ESG should become a part of the thinking to run the entire business, especially those directly involved in the activity, create data – from employees to operate machinery, to the finance department or human resources.
Combined training ESG and skills data analysis
A key effective training should not only introduce the concept of ESG, which also need help staff understand the role of data management in ESG. For example, hr staff need to know how to track only number of gender diversity in recruitment; the accounting department need to understand how to record energy costs under angle carbon emissions.
Training in-house or outsource – depending on capacity, there are
If businesses do not have a team of qualified teaching internal, can fully cooperate with the consultant specializing in ESG or conversion of the. Many businesses select the combining form: foundation training for the whole company, at the same time hire outside experts to intensive coaching for the group in charge of implementing ESG and data analysis.
Value clear most of the activity this training is to reduce ambiguity, discrepancies in the understanding of ESG, at the same time speed up the deployment in fact.
3.3. Application of technology in tracking, data analysis ESG
In the digital age, the collect analytical data no longer fits, especially with ESG – where data arise from many different sources, taking place constantly require high accuracy and precision.
Digitization process ESG: from collecting, analyzing to report
The management software ESG modern allows businesses to integrate multiple data stream (from commissioning, finance, hr...) on the same platform. Thanks to that, the business can monitor trends, detect risks, reporting ESG quickly according to the international standard format (such as GRI, TCFD).
According to a study by McKinsey in the year 2023, the business use of software dedicated to data management, ESG can save up to 30% of the time reporting compared with the traditional methods.
In summary, implementing ESG efficiency is not a goal far, which is the process can start today from the standardized data, improve team capability and application of appropriate technology. This is not only a step to adhere to, but also the strategy to create competitive advantage in a world that is geared to sustainable development.
4. Practical benefits when business standards-compliant ESG
In the context of the requirements of sustainable development increasingly apparent, compliance, ESG is not just a moral commitment, but also become a competitive advantage really. Business know how data mining ESG efficiency will gain much value beyond what financial statements can typically reflect.
4.1 Increase the ability to access investment capital blue
Many investment funds, financial institutions in the world have put ESG into mandatory criteria when considering investments. This is synonymous with the business strategy ESG, clear, transparent data analysis ability, good will easily reach the capital deals, both domestic and international.
For example, many banks now have deployed the package green credit dedicated for business has committed to reduce emissions, transparency bill of material ESG. Compliance with ESG is no longer theory, which is a prerequisite to open up opportunities for sustainable financing.
4.2 Improve brand image, customer confidence
Consumers today are not only interested in quality products, but also interested in how the business creates products that. A recent report by Deloitte indicates that almost 60% of consumers are willing to pay more for products that come from corporate responsibility to society and the environment.
When public business data ESG transparency, shown actual effort in reducing emissions, protecting the rights of workers or contributing to the community, the brand will build is sustainable trust with the market.
4.3 optimal operating costs through control of the environment and society
One of the common misunderstandings is ESG only do “the cost”. In fact, ESG to help businesses identify cut the hidden costs such as waste, energy, processing costs, risks, labor, or loss due process is not transparent.
For example: Business monitor data on electricity consumption in real time, will easily discover the device to operate less efficiently from that timely adjustment to reduce emissions and operating costs.
In addition, the well-managed social factors – such as construction working environment, safety, transparency – also help businesses reduce the rate of absenteeism, increase productivity and retain personnel quality.
4.4 Compliance with legal regulations to minimize legal risks
In the next time, ESG will not only standard recommendations, which will become a mandatory requirement in many new rules, both in Vietnam and in the world. The active deployment of ESG to help businesses avoid the legal risks as is unscheduled inspections, removal from the program in support of The state, or difficulty when bidding for public projects.
At the same time, system data, ESG, it will help the business prepare for the audit, reporting to shareholders, partners international, an easy, professional.
Important starting point for the process of achieving the standard ESG is the data – from the collect, analyze, for the ability to use data to make decisions. With the support of technology, appropriate analysis, businesses can convert ESG from the pressure of the opportunity, from the commitment of particular value.
