Vietnam companies urged to balance profits and social goals

Businesses in Vietnam should not delay embedding social and environmental objectives into their core strategies, wrote Santiago Velasquez, associate program manager for the MBA program, and Burkhard Schrage, associate head of the management department at The Business School, RMIT Vietnam.

Vietnam's economic dynamism is undeniable. The nation has witnessed remarkable growth in recent years, fuelled by a young workforce, foreign investment, and increasing global integration.

However, surrounding this economic success, a crucial question looms: How can businesses balance the traditional pursuit of profit with the growing demand for environmental, social, and governance (ESG) responsibility?

This question reflects a fundamental shift in the business landscape. Stakeholders, from investors to consumers, expect companies to contribute positively to society and the environment, and they are increasingly holding businesses accountable for their ESG performance.

In 2023, a survey conducted by Schneider Electric with 500 companies in Vietnam found that 99% of them have sustainable intentions, but over half have yet to act on them.

Vietnamese companies face a challenge – balancing the traditional focus on maximizing profits for shareholders with the growing importance of ESG concerns. This shift can create tension between financial goals and broader societal expectations.

Forward-thinking business leaders are beginning to recognize that profit and purpose are not mutually exclusive. They understand that ESG considerations are not just ethical imperatives but also smart business strategies.

The RMIT academic cited a study by McKinsey which found that businesses with a positive record on ESG issues achieve better financial results, such as 10% higher business valuations than those with a negative record.

Companies with strong ESG performance often enjoy enhanced brand reputation, attract and retain top talent, and gain access to new markets. These factors can contribute to long-term financial success and sustainable growth.

There might be unique challenges for Vietnamese businesses when implementing ESG practices compared to their global counterparts. These can relate to economic, infrastructure or regulatory factors specific to Vietnam. Nevertheless, businesses are well advised to implement global best practices and core principles of ESG.