Sustainability reporting in Vietnam: Why it matters

Tiếng Việt

Sustainability reporting in Vietnam: Why it matters

According to RMIT Accounting lecturer Dr Samuel Buertey, as Vietnam seeks to move up the value chain and become a major player in the global outsourcing industry, sustainability is an area that companies will need to consider in making the country attractive.

The ongoing evolution of sustainable business

I recently met a businessman at a business networking event who introduced himself as a procurement professional. Part of his job entails linking international companies with manufacturers based in Vietnam. Not long ago, he received a request from a client, connected them to a local supplier, and even provided samples for their perusal.

However, before the transaction would be finalised, the client demanded to see evidence of how the manufacturer based in Vietnam adopted responsible corporate practices, particularly in the treatment of its employees and their working conditions. I asked him about the size of the two companies and to my surprise, he indicated both companies were small and medium-sized enterprises (SMEs).

Dr Samuel Buertey, Accounting lecturer at The Business School, RMIT Vietnam

Years ago, few businesses cared about how suppliers treated their workers, let alone base their transactions on such matters. It used to be the big and multinational companies that embraced the idea because of their global presence, stakeholder obligations, and brand promotion objectives. But here we are, SMEs are also considering the working conditions of employees of prospective suppliers before placing orders.

Expectations for corporate sustainability

More than before, there is much expectation for companies to demonstrate their commitment to sustainable business practices. Stakeholders are interested in the impact of companies on the economy, environment, and society. Such societal expectations were only known in advanced countries. However, this is no longer the case.

Even though local expectations in developing countries may be low, the demand for sustainable business practices has moved beyond national borders. External forces also push local companies towards sustainable business practices, especially in countries where companies are exposed to international markets. And this is where many emerging economies, such as Vietnam, find themselves.

Vietnam has gradually positioned itself as a manufacturing and business process outsourcing (BPO) location for many global brands. The 2021 Kearney Global Service Location Index (GSLI) ranked Vietnam as the sixth viable offshore destination out of 60 countries. A report by PricewaterhouseCoopers (PwC) in 2018 classified Vietnam's BPO industry as one of the main reasons foreign investors are attracted to the country.

While factors such as cost, skilled labour force, and stable economy are central attraction points for the growth in Vietnam's BPO sector, recent data shows that many more companies are factoring in the planet when it comes to outsourcing decisions.

Most companies looking to improve their business process with outsourcing are also keen on being as sustainable as possible.

Thus, most companies looking to improve their business process with outsourcing are also keen on being as sustainable as possible. Companies do this by ensuring that they work with a supplier who cares as much as they do to transform our world for the better.

In a 2020 Harvard Business Review article, the authors indicated a growing number of global firms would be pledging to work only with suppliers that commit to social and environmental standards. This forms part of their wider sustainable supply chain management efforts that seeks to cascade sustainable practices throughout the organisation-wide supply network.

Research from Ernst & Young (EY) in 2022 found that eight in ten supply chain leaders are committing to sustainable supply chain operations, focusing on, among other things, ethical sourcing as part of their larger sustainability goals.

The significance of sustainability reporting

Companies can demonstrate their commitment to sustainable development goals through reporting.

Sustainability reporting is the disclosure and communication of environmental, social and governance goals as well as the progress towards them. In this regard, sustainability reporting should not be seen as the reserve of only big public companies or multinationals. Any company that genuinely prioritises sustainability must not have too much of a problem producing a list of its sustainable goals and how it is working towards achieving them.

It must be admitted that there are some notable efforts by some companies currently producing sustainability reports in Vietnam. These are, however, only a few and they are generally large publicly listed companies. According to the State Securities Commission of Vietnam (SSC) only 19 public companies issued a separate sustainability report in 2022.

Considering the current global trend where many companies are committing to sustainable supply chain management through outsourcing, it is expected that many more companies in Vietnam will not only embrace sustainable business practices but will put in place measures to document and report on such to remain attractive in the international BPO industry.

Story by: Dr Samuel Buertey, Accounting lecturer at The Business School, RMIT Vietnam

Business and management

14 June 2023