Vietnamese logistics enterprises catch up with ESG

Adapted to ESG

The shift of supply chains by large corporations to Vietnam is an opportunity for domestic logistics enterprises to provide services to foreign investors. However, foreign enterprises have quite strict requirements on ESG (environmental, social, and governance) criteria, in which logistics services must also meet green and sustainable criteria.
 

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According to the Vietnam Logistics Report 2022, the content of green logistics development includes greening transportation activities, greening warehousing activities, and greening packaging activities...

In Vietnam, logistics greening activities are quite lackluster, with only a few large logistics enterprises catching up with the green logistics trend and implementing sustainable development strategies.

One of them is Saigon Newport Corporation (SNP) - a container port operator with a market share of import and export containers accounting for over 90% of the southern region and nearly 50% of the country's market share. SNP is applying the ESG strategy in logistics activities by replacing diesel-powered container lifting equipment with electric ones, resulting in huge cost savings.

For transportation, SNP has carried out 80% of freight transport between Cai Mep - Thi Vai port and the surrounding area by barges to replace trucks. In the North and Mekong Delta, SNP's port system is also transported by barges instead of trucks, which has contributed to reducing CO2 emissions...

Another large enterprise, Gemadept Joint Stock Company, has also applied ESG criteria to the production process, such as investing in modern equipment and using clean energy. Gemadept also implemented specific activities related to GHG emission reduction, such as the establishment of the ESG Committee; coordination with a professional consulting unit to conduct training, inventory, and report greenhouse gas emissions according to international standards ISO 14064-1.

More orders from “the big man"

At the ESG Conference - The inevitable shift of the global supply chain recently held, the sharing of many businesses showed that EGS is an important "key" to help businesses add value and get more orders.

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Mr. Huynh Thanh Trung, Chairman of LeanWares Company, said that the trend of processing factories in China moving to Vietnam is a good opportunity for Vietnamese enterprises to access investment capital from other countries. However, businesses face the challenge of meeting green standards, including ESG, because "big players" like Apple commit that by 2030, their supply chains will have zero carbon emissions.

“Vietnamese businesses want to break into the supply chain for the ‘big guys’, so they have to change and conduct ESG. This is the harsh screening of the market. Many Vietnamese businesses are standing at a crossroads, giving up the game, restructuring to adapt or investing green," said Trung.

As reflected by many businesses, the biggest difficulty when investing according to ESG criteria is the high input costs that make businesses unprofitable. But reality has proven otherwise. In the long term, enterprises applying sustainable development criteria can reduce costs because of using fuel-efficient means of transport, using clean fuels, etc. Enterprises also have the opportunity to receive orders from suppliers' "bosses".

Mr. Preben Elnef, Vice President and General Director of LEGO Vietnam Group said that in LEGO's development strategy, the Group always prioritizes local suppliers. The remarkable point for businesses that want to become LEGO suppliers is not large-scale or small-scale but must comply with the sustainable development standards that LEGO is implementing at its factory in Binh Duong. together towards environmental protection and sustainable development.

Although the opportunity is there, domestic logistics enterprises will face great competition from foreign enterprises that are pouring capital into the logistics industry. Therefore, Vietnamese businesses need to soon apply ESG standards to improve their competitiveness when participating in the global green supply chain.