Small- and Medium-sized Enterprises (SMEs) require strategies for tapping into Environmental, Social, and Governance (ESG) investment capital.
Small and medium-sized enterprises (SMEs) in Thanh Hóa Province, Vietnam are still battling to meet Environmental, Social, and Governance (ESG) standards. Let's dive into the challenges they face and potential solutions to help them access green capital.
The current scenario is dire for SMEs. They face immense challenges in securing the capital required to comply with the escalating ESG standards set by international partners, as highlighted by experts.
ESG has become a global trend, emphasized Deputy Minister of Home Affairs Nguyễn Thị Hà. It's crucial for not only the sustainable development of enterprises, but also for the long-term success of nations. Investors, consumers, and communities are increasingly focusing on ESG factors when making decisions, making it indispensable for businesses to adopt these standards to remain competitive.
The Vietnamese government has prioritized integrating ESG principles into the country's socio-economic development framework. Policies that encourage businesses to focus on sustainable growth have been implemented, including measures for environmental protection, social welfare, and improved governance practices. The Ministry of Home Affairs plays a pivotal role in fostering an environment conducive to ESG practices by promoting legal frameworks, administrative reform, and improved governance.
However, despite positive changes in Vietnam's sustainable development policies, SMEs are still struggling to meet ESG standards. The director of the Office of Enterprises for Sustainable Development at the Việt Nam Chamber of Commerce and Industry (VCCI), Nguyễn Tiẽ Huy, points out that while the government has issued policies to reduce carbon emissions, promote renewable energy, and support digital transformation, these measures have not been fully effective for SMEs.
One of the most significant barriers for SMEs is access to capital. Many green credit programs have been introduced, but the requirements for these loans — such as financial transparency and adherence to ESG standards — often surpass the capabilities of smaller businesses. Moreover, SMEs face challenges in obtaining modern, clean technology due to high upfront costs and a lack of suitable solutions.
SMEs face another challenge in understanding and implementing ESG, particularly at the governance level, leading to slow or superficial implementation. Huy suggests that for sustainable development policies to be effective, the government needs to focus on removing institutional barriers, promoting a transparent legal framework, and offering more flexible financial mechanisms. He also stresses the importance of providing ESG training and support to SMEs to help them align with global trends.
The director of the Institute of Economics and Enterprise Development and Vice President of the Hanoi Association of SMEs, Mạc Quốc Anh, identifies some positive developments in the ESG landscape. Green credit has grown by 22% compared to the previous year, and international capital is flowing into ESG initiatives. However, several challenges persist, such as low disbursement rates, lack of collateral, unfamiliarity with ESG standards, and insufficient expertise in ESG amongst SMEs.
To address these challenges, solutions such as the establishment of a green credit guarantee mechanism, simplifying green criteria, promoting the digitalization of business data, offering tax incentives for green businesses, and building a network of ESG consultants have been proposed. The role of the financial sector, particularly banks, in supporting ESG implementation is also acknowledged.
A medium sized enterprise in Thanh Hóa Province. Việt Nam's small and medium sized enterprises (SMEs) are still struggling to meet ESG standards. -VNA/VNS Photo
Financial mechanisms include green credit packages and preferential loans, international funding partnerships, and credit guarantee proposals. Technical support initiatives include ESG consulting networks and digitalization of business data. Policy and regulatory frameworks encompass tax incentives for green businesses, simplified green criteria, and industry-specific support.
These solutions emphasize hybrid approaches combining financial accessibility, hands-on guidance, and regulatory clarity to bridge the gap between ESG ambitions and SME capabilities. The continuous efforts to strengthen the ESG landscape in Vietnam will undoubtedly benefit SMEs in navigating the complex world of green capital and contributing to a more sustainable future.
- The government's priority is to integrate Environmental, Social, and Governance (ESG) principles into Vietnam's socio-economic development, acknowledging its importance for both business success and national sustainability.
- Investors, consumers, and communities are increasingly examining ESG factors when making decisions, making it imperative for businesses to adopt these standards to remain competitive in the market.
- However, Small and Medium-Sized Enterprises (SMEs) in Thanh Hoá Province are still struggling to meet ESG standards, despite the government's efforts to encourage sustainable growth.
- Access to capital is one of the most significant barriers for SMEs, as the requirements for green loans often exceed their financial capabilities and adherence to ESG standards.
- Another challenge for SMEs is understanding and implementing ESG, particularly at the governance level, resulting in slow or superficial implementation.
- The Vietnamese government aims to address these issues by focusing on removing institutional barriers, promoting a transparent legal framework, and offering more flexible financial mechanisms for SMEs.
- green credit has grown significantly compared to the previous year, yet challenges persist, such as low disbursement rates, lack of collateral, unfamiliarity with ESG, and insufficient expertise in EME among SMEs.
- Financial mechanisms to help SMEs access green capital include green credit packages, international funding partnerships, and credit guarantee proposals.
- Technical support initiatives for SMEs include the establishment of ESG consulting networks and the digitalization of business data.
- To ensure continuous efforts in strengthening the ESG landscape in Vietnam, the government must prioritize a hybrid approach that combines financial accessibility, practical guidance, and regulatory clarity to match SMEs' ESG ambitions with their capabilities, ultimately contributing to a more sustainable future.
