By Brett Davis
Sustainable business practices are good for everyone, but knowing what your goals are and how to achieve them is what will make a company truly effective.
WHAT DOES IT MEAN TO BE A good corporate citizen in 2021? International companies operating in Vietnam are no strangers to Corporate Social Responsibility (CSR) activities, but the landscape is very different from when the country began opening up its economy in the late 1980s and early 1990s.
Society at large has also evolved, and the role corporations play in broader society has been carried along by these changes. There is more of an onus on the business world to be part of the solution to the challenges the world is facing. Not forgetting that it can also be good for the bottom line.
So, the question becomes how to approach this element of your business, how do you decide what your goals are, where to direct resources, and how to execute this strategy so that you are achieving those goals.
A BROADER DEFINITION
Increasingly, a company’s CSR activities are seen as a part of its Environmental, Social, and Governance (ESG) strategy. These three pillars take into account the sustainability of a business’s practices, its ethical impact in the communities where it operates, and efforts to mitigate long-term risk for investors.
Traditional CSR activities supplement an overall ESG strategy or policy, which in turn guides an organization’s actions and commitments. Think of it as a more holistic approach that looks both outward towards the world and also inward to what that organization is and aspires to be.
Much of the move toward this approach has been led, institutionally at least, by the United Nations. First with the Millennium Development Goals at the beginning of the century, and later the UN Sustainable Development Goals which were designed to give guidance to the global community on sustainable development priorities through to 2030.
In addition, there was also the UN Global Compact, also launched in 2000, which is a voluntary initiative global corporations can sign on to pledging to ethically conduct their business around the four pillars of human rights, the environment, labor, and anti-corruption.
However, it is the former, the UN Sustainable Development Goals, that are now most commonly used as a key tool in companies developing their ESG priorities and action plans.
TIMES HAVE CHANGED
The view still exists in some quarters that CSR equates to simple charitable or community activities – provide meals to an orphanage, plant some trees, and so on – but while these endeavors are certainly worthy, they limit the holistic and far-sighted view a cohesive ESG strategy should encompass.
Van Ly, the co-founder of Raise Partners, a consultancy that advises and connects the corporate world with non-profit partners, said she had seen a definite shift in approach in her more than a decade working in the field.
“The trend ten years ago was a lot of companies were coming to non-profits with very specific, one-off projects,” she said. “The problem is with short-term thinking, every year changing causes, over time the impact that a company can have becomes quite limited.”
Companies are getting better at developing a strategy in the area, Ly said, in large part by looking at what issues and initiatives align with their values. “Companies should first step back and think what do they want to do, what impact they want to make, and then think about what kind of resources do we want to put behind that,” she said.
Aligning a company’s values is a good place to start, but so is looking to leverage off the strengths and core competencies of the organization. Naturally enough, your business will be able to help tackle issues that you are already good at solving.
Global professional services firm KPMG earlier this year released their global ‘Our Impact Plan’, outlining their commitment to playing a part in combating issues such as climate change, inequality, and racial injustice. In the document, the company’s Global Chairman and CEO Bill Thomas wrote, “It is our responsibility to help shape and lead on those critical issues facing the world, where our capabilities make a difference.”
Using your capabilities is a key point, and one expanded upon by KPMG Vietnam Partner John Ditty. He pointed to the idea of choosing one or two of the UN Sustainable Development Goals that have some synergy with what a business is good at and can also benefit from, in this particular case helping to deliver quality education.
“We are about selling human capital, we are about having really smart people help our clients do things,” he said. “When we do things from an ESG point of view a lot of what we do is around those sustainable development goals, because we feel it is aligned to our business, we can talk about it, we understand it, and if we get it right it helps us.”
This, of course, makes perfect sense. A professional services firm could run a program planting trees, or, as Ditty pointed out, they could run a program helping people learn to create and manage household budgets which would have an array of flow-on benefits to the community.
“Increasingly with multinationals, your capabilities are more tied to your purpose, what we call purpose-led organizations,” he said. “It’s about aligning your CSR program, or your ESG program or your citizenship program, whatever we choose to call it, it’s about aligning that to your business and making it part of your core business strategy.”
GLOBAL vs. LOCAL
Knowing your company’s values, aligning your ESG strategy to your strengths, and using frameworks like the UN Strategic Development Goals to chart a course are all well and good. But how does a multinational organization operating in numerous territories be effective and achieve its goals everywhere they do business?
It is a common tension that needs to be managed when a multinational corporation sets its ESG priorities at a global level but then needs to be integrated on the ground in the many different, multifaceted cultures in which they operate.
CREATING OPPORTUNITY, ONE PERSON AT A TIME
QLM Label Makers are an Australian-based label designer and manufacturer that also has operations in Vietnam and Malaysia. In all of their locations, they have a CSR program focused around providing accessibility for otherwise marginalized groups.
In Vietnam, this focus meant they provided people confined to wheelchairs employment opportunities they would otherwise be locked out from. To do this they teamed up with Maison Chance, a nonprofit that provides housing, care, education, and vocational training for disadvantaged and physically handicapped people in Vietnam.
The company built and installed special workstations and also brought meals and beds to wheelchair-bound workers. They also created a buddy system for evacuations, and the able-bodied workers assist with bringing meals and beds to the workers in wheelchairs.
For Simon Pugh, who heads up QLM’s operations in Vietnam, the goal was to have his disabled workers be seen as able to make a contribution and be productive. “You can normalize their existence just by working with them in the same place every day,” he said.
To get that buy-in from the rest of his staff, he simply communicated and led by example. “I explained to the staff what we were doing and why,” he said, “but the main way we got buy-in was just by me going and sitting down with them and working together as equals, and that there was accountability for outcomes and there were no free passes.”
Ideally, this can come about by those goals being initially set out as broad themes, with local outposts given enough leeway to contribute to those themes most appropriately in the local environment. Flexibility would seem to be the key, with engagement with local staff in each country helping to sharpen the focus within the global scheme.
Raise Partners’ Ly gave an example of an international client that had set its sights on doing good in the area of mental health, particularly as it related to dealing with the fallout of the Covid-19 pandemic. The problem, however, was that the culture of Vietnam was not yet sufficiently open to addressing the issue. “In Vietnam, we are still in a place where there is a lot of stigma around mental health issues and dealing with mental health, and because of that, there are not a lot of non-profits working in that space,” Ly said. “The corporate view was very narrow on what the money was supposed to be spent on, it just happened in Vietnam it is just not a thing that we do yet.”
This disconnect between what multinational corporations define as their ESG goals and Vietnam’s priorities under the UN Sustainable Development Goals were at the heart of research carried out by Mai Thi Nguet Anh at the University of Stirling in the UK.
Anh found one of the key stumbling blocks was a lack of effective communication and consultation between the Vietnamese government, business, and the NGO sector. “But Vietnam is still a developing country, so every goal is important,” she said.
MEASURING PROGRESS
Just as financial reporting tracks the relative state of a business’s performance, tracking and reporting on an organization’s sustainability are essential for measuring progress. However, unlike frameworks such as the International Financial Reporting Standards (IFRS), there are no widely agreed-upon metrics for measuring ESG progress.
Some of the frameworks that currently exist include the Global Reporting Initiative, Climate Disclosure Standards Board, Sustainability Accounting Standards Board, and the UN Principles for Responsible Investment. This is also how the Vietnam Sustainability Index is maintained of the top 100 listed companies traded on the Ho Chi Minh Stock Exchange with the highest scores of sustainability.
There has been some progress made with the Stakeholder Capitalism Metrics framework developed at the 2020 Davos World Economic Forum in conjunction with the International Business Council, a group of 120 of the world’s largest companies. This system of common metrics will be used by these companies to align their mainstream reporting on performance against ESG indicators for their investors and other stakeholders.
KPMG will be using the Stakeholder Capitalism Metrics framework to measure the progress of their global impact plan. However, it might take longer for the system to become commonplace here. “Vietnam is adopting IFRS in two years, and that’s about 15 years behind the rest of the world,” said KPMG Vietnam’s Ditty. “It will take time, but there is work being done, and there is the recognition it needs to happen,” he said.
GOOD FOR EVERYONE
There are a lot of upsides to having a robust and well-executed ESG strategy, as is increasingly being recognized by the world’s largest corporations. Looking to grow your business sustainably helps identify and mitigate long-term risk, helps attract the best talent to work for you, makes people want to purchase your goods and services, and encourages a broader swathe of institutions wanting to invest in you.
Harnessing the power of industry and capital markets can help solve some of the most pressing problems the planet is facing. Leadership is needed at a time when all governments have competing agendas and limited budgets.
This is perhaps nowhere more true than here in Vietnam. The country is exceedingly vulnerable to climate change and facing steep challenges with air and water pollution and a host of other areas.
International corporations have benefited greatly from Vietnam’s rapid economic growth over the last 35 years, and it is the private sector that can help lead the drive to ensure that continued growth is sustainable and is there for future generations.
