(Dân trí) – Many businesses still view ESG as a mandatory cost. However, when properly quantified, ESG can become a driver of profitability and a prerequisite for survival in global supply chains starting this year.
In the past, ESG was often regarded as a long-term investment whose benefits were difficult to quantify, making many Boards of Directors cautious about allocating budgets to ESG initiatives.
However, the global landscape is changing rapidly, as ESG is becoming directly linked to financial performance, the cost of capital, and companies’ long-term competitiveness.
ESG can become a driver of profitability and a critical factor for business survival from 2026 onward (Photo: Council Fire).
International financial institutions such as the World Bank and the International Finance Corporation (IFC) have integrated ESG criteria into their credit risk assessment processes, creating clear differences in the cost of raising capital. Companies that perform well against ESG standards may gain access to financing at more competitive interest rates, while those that fail to meet these standards may face higher capital costs or restrictions on access to international credit.
In manufacturing and exports, ESG is increasingly becoming a mandatory “social license to operate,” as major markets such as the EU, the United States, and Japan continue to tighten sustainability requirements across supply chains. Companies that fail to meet ESG requirements risk being excluded from global supply chains, resulting in direct revenue losses rather than merely the loss of potential business opportunities.
In the banking sector, ESG has a direct impact on asset quality and the credit risk of loan portfolios. Extending credit to companies that fail to comply with ESG standards may expose financial institutions to legal risk and reputational risk, as well as increasing pressure from international institutional investors that apply Responsible Investment principles.
Against this backdrop, the key question is no longer “whether to invest in ESG,” but rather “how to measure and manage ESG performance” so that it can be integrated into companies’ financial governance systems and long-term development strategies.
EXPERT Q&A
Question:
For Vietnamese companies in the manufacturing and banking sectors, are there any methods or sets of indicators that can clearly quantify the return on ESG investment (ROI of ESG)? How can Boards of Directors be persuaded to view ESG as a long-term development strategy rather than a short-term cost?
Dr. Bùi Thị Thanh Hương – Department of Climate Change and Sustainability Science, VNU School of Interdisciplinary Sciences and Arts, Vietnam National University, Hanoi
To quantify the return on ESG investment, companies can apply the Social Return on Investment (SROI) methodology, an analytical framework that enables the environmental and social impacts of ESG activities to be converted into specific and comparable financial values. This approach helps transform ESG from a set of qualitative objectives into quantitative indicators that can directly support Board-level decision-making.
In practice, the benefits of ESG can be seen most clearly through its impact on operating costs, including energy savings, waste reduction, and the optimization of supply chains toward greater sustainability. These savings can be directly translated into financial value, contributing to improved gross margins in the short and medium term.
In addition, ESG plays an important role in mitigating legal and market risks, including the risk of penalties for violations of environmental or labor regulations, as well as the risk of being excluded from international supply chains for failing to meet buyers’ sustainability standards. When these risks are quantified as contingent liabilities, companies can more clearly recognize the “preventive” value generated by ESG investment.
Another important dimension is access to capital and the optimization of capital costs. Companies that perform well against ESG standards are often viewed more favorably by international financial institutions and ESG-focused funds. As a result, they may gain access to green finance at more competitive costs, improve their valuation multiples, and strengthen their ability to raise capital in financial markets.
Furthermore, ESG is increasingly linked directly to revenue and companies’ ability to maintain their share of export markets. Many major markets, particularly the EU with its Carbon Border Adjustment Mechanism (CBAM) and regulations on sustainable supply-chain due diligence, are turning ESG standards into prerequisites for participation in international trade. In this context, failing to invest in ESG not only weakens a company’s competitive advantage but may also result in a complete loss of market access.
For Boards of Directors, the message needs to be communicated clearly and supported by quantitative evidence: ESG is neither a voluntary expense nor simply a corporate social responsibility (CSR) activity. Instead, it represents an increasingly important compliance requirement and a prerequisite for maintaining sustainable competitiveness.
Companies that delay ESG investment today may face higher transition costs, loss of export markets, reduced access to capital, and a weakening of their strategic position in the near future.
About Dr. Bùi Thị Thanh Hương
Bùi Thị Thanh Hương is an expert in environmental communication and sustainable development, with more than 21 years of research and teaching experience at Vietnam National University, Hanoi. She is the founder of Greentech Spin-off and Z-carbon Corp and has authored more than 30 scientific publications in Vietnam and internationally.
Her major research interests focus on ESG, particularly the Environmental (E) and Social (S) dimensions, with practical applications including smart waste bins, organic waste treatment, and the VNNETZERO carbon accumulation platform. She has also developed educational technology solutions involving digital learning materials, VR/AR, and ICT applications.
Many of her projects have been recognized as intellectual property and implemented in communities, including Smart Refill, 3SR, and a school noise-warning system. She is currently pursuing research on the circular economy based on smart waste-resource management, with the goal of contributing to a more sustainable living environment.
Source: dantri.com.vn