In her address to the recent Vietnam-Singapore Business Forum (VSBF) 2024, Forum Director Ms. Pham Thi Thu Hang said the swift global shift towards green practices will allow pioneering businesses to unlock a raft of development opportunities, boost their competitiveness, increase market share, and improve customer and partner retention.

Similarly, Mr. Ho Sy Hung, Deputy Chairman of the Commission for the Management of State Capital at Enterprises (CMSC), said implementing sustainable practices provides businesses with a foundation to instigate change throughout their entire value chain and ecosystem.

Costly investments

At the Hiep Phuoc Industrial Park in Ho Chi Minh City, the Xuan Mai Paper Co., Ltd. has been a pioneer in adopting a circular economy production model. It has invested in a disc filtration system over the years to recover pulp and reuse water, together with a fluidized bed boiler system that converts all waste from paper production into input fuel for the boiler. The company also operates a collection line for scrap paper from factories, recycling it into roll paper and toilet paper that meet export standards in markets such as the US and Europe.

Mr. Luong Nhu Huynh, Director of Xuan Mai, explained that with this new system, the remaining wastewater is reused for production. By-products and waste from the production process are also recycled to generate energy for production, thereby cutting emissions. The company recognizes that the requirements of partners in product quality standards can compel businesses to adopt greener production practices.

Elsewhere, the Haesung Vina Co., Ltd. at the Khai Quang Industrial Park in northern Vinh Phuc province is committed to green production by using eco-friendly materials, increasing recycling, and minimizing pollution and waste in their production processes. They have also replaced fluorescent lighting with LED bulbs, installed inverters for the air compressor system, and set up a solar panel system on the factory roof to power its production. These measures reduce energy use by some 500,000 kWh annually, lowering its operational costs and its greenhouse gas emissions.

In northern Thai Binh province, Mr. Nguyen Tien Phuong, Chairman and General Director of sportswear manufacturer Tan De, emphasized that the company is committed to green and sustainable development from the planning and design stages to its energy use. “To save on electricity consumption, our company uses Skyline roofing panels to harness natural light, installed glass walls on all four sides to maximize natural light, as well as skylights for ventilation and energy-efficient equipment with sensors that automatically adjust lighting based on levels of natural light,” he explained.

However, representatives from many other businesses noted that the main challenges in green transformation are awareness, finances, and human resources. Mr. Pham Van Viet, General Director of Viet Thang Jeans, pointed out that to keep pace with global trends, his company has invested in machinery, green production, and technology. “An automatic textile production line requires about $1 million in investment,” he said. “However, an ‘eco-tech’ standard production line requires up to 12-times that figure.” The steep cost proves to be a major hurdle for Vietnamese businesses in the race towards green transformation.

Mr. Tran Nhu Tung, Chairman of the Thanh Cong Textile Garment Investment Trading JSC, is of a similar mind. He noted that most businesses understand the importance of sustainable development and recognize the significant shift in environmental standards demanded by customers, especially those in Europe. However, amid ongoing economic difficulties, the pressure on businesses to generate revenue while investing in green initiatives is substantial, as the costs associated with environmental protection are generally quite high. “Customers demand greener and cleaner operations, but are unwilling to accept higher prices, which impacts the profit margins of businesses,” he said.

Three key barriers

The 2023 Provincial Green Index (PGI), which was based on surveys of domestic private enterprises and foreign-invested enterprises (FIEs), revealed that higher expenditure indicates a greater emphasis on environmental protection relative to other business operations.

However, the associated report notes that existing green investment levels are quite low. Businesses investing the most in green activities tend to be export-oriented companies targeting developed markets, where environmental standards are stricter and consumers are more aware of sustainability. On average, export businesses spend 1.4 per cent of their total operating costs on green practices, compared to 1 per cent or less for non-exporting companies.

At a recent seminar, Mr. Nguyen Hai Hung, Deputy Director of the Supporting Center for Enterprises (SCE) at the Hanoi Department of Planning and Investment, highlighted that domestic businesses, particularly small and medium-sized enterprises (SMEs), face significant challenges in achieving goals in green growth and sustainable development, with the main obstacles including limited experience, capital, and technology. Investing in green technology and infrastructure often demands substantial resources, imposing financial pressure that threatens long-term sustainability and reduces access to investment capital.

Ms. Claudia Anselmi, General Director of Hung Yen Knitting & Dyeing and Deputy President of EuroCham, emphasized that businesses are facing a significant challenge due to their limited grasp of digital and green transformation. She highlighted that while the green transition presents opportunities, it also poses challenges, and underscored the necessity for businesses to enhance their financial and accounting systems and seek support to ensure successful adaptation.

Professor Edmund Malesky, Research Director of the Provincial Green Index Initiative Project, proposed that governmental and international organizations offer financial and technical aid to provincial authorities during the green transition, to address these resource constraints. Furthermore, he suggested the implementation of market-driven incentives and mechanisms to encourage businesses to revise their production methods and comply with environmental regulations.

The PGI 2023 report also advocates the boosting of consumer awareness and acceptance of green practices. It therefore emphasizes the importance of conducting awareness campaigns and communications initiatives to educate Vietnamese consumers on the significance of environmentally-friendly production and business operations. When consumers show a willingness to pay a premium for eco-friendly products and services or to penalize brands and companies for their environmental pollution, this provides further impetus for the adoption of green practices.