Top down approach ideal for greener supply chains in Vietnam: RMIT expert

Businesses at the top of supply chains need to take the lead in promoting green transformation of manufacturing processes, writes Dr Nguyen Manh Hung, RMIT senior program manager for logistics and supply chain management.

Customer demand for green products is pushing manufacturers and suppliers to adopt new standards and adjust their processes. Customers, especially in developed nations, are becoming more aware of the environmental impact of their purchasing decisions.

In Vietnam, up to 84% of consumers would pay more for products ensuring sustainability, a 2023 Rakuten Insight survey found.

Among Vietnam’s top export markets, the EU has implemented stricter environmental regulations and standards for imported products and services. Being green is no longer an option, it’s an “order winner” in exports.

From a supply chain point of view, buyers play a crucial role both in the supervision of and collaboration for green efforts. They can drive the green transformation process to ensure that the final products/services fit market demands.

Walmart, H&M, Uniqlo, Unilever, Apple, and Nestlé are some of the top supply chain leaders globally. In Vietnam, we can name VinEco, Vinamilk, Viet Thang Textile, Vinatex and Thaco.

Major clothing retailers like H&M, Zara and Uniqlo have started mandating their suppliers in Vietnam to use organic cotton, reduce water/energy use, and implement waste recycling. This has prompted Vietnamese textile manufacturers to invest more heavily in eco-friendly production processes.

Meanwhile, VinEco has promoted green farming invested in Quang Ninh and Ha Nam provinces by improving local capacity to engage in it. The provinces are able to distribute certified “green and clean” vegetables to cities and provinces nationwide.

Such companies play an important role by monitoring green processes, providing necessary knowledge/information, and in many cases, facilitating green financial models.

They should monitor the environmental impact of their suppliers after introducing relevant standards and setting clear performance expectations covering emissions, waste, water usage, energy consumption, and other functions.

Buyers should work closely with their suppliers to develop and implement plans to address the environmental challenges they are facing. They can conduct joint workshops to enhance knowledge and build up environmental management capabilities.

Green financing for supply chains deserves particular attention, as it can create incentives for suppliers to commit to sustainability. Supply chain leaders are typically large corporations with abundant resources or access to better investment schemes.

They can assist smaller companies (local manufacturers) to deal with the cost of green transformation. Besides, corporate reputation associated with the supply chain leaders can facilitate access to green investment via green bonds or sustainable development loans.

In a survey of 437 global manufacturers, my RMIT colleagues and I found that businesses can improve their market share and revenue – thereby enhancing their financial positioning – if they know how to highlight their environmental targets and methodologies used to attain such goals in their conversations with stakeholders.

It is worth noting that over time, a mutually beneficial relationship between green consumers and manufacturers can trigger process innovation, which could lead to financial and cost improvements.

The greater the pressure from consumers to go green, the stronger the process improvement in businesses. It would make sense for companies to boost strategic partnerships and collaboration with customers in ensuring greener supply chains and more environmentally-friendly products.