Connecting ESG Social Factors with Financial Strategy: An Inevitable Direction for CFOs in Vietnam

Vietnam also has great opportunities to promote the "Social" element in ESG

In recent years, ESG (Environment – Social – Governance) has become one of the strategic priorities of global businesses, and Vietnam is no exception. However, in most businesses, the social element of ESG has not been properly assessed. Discussions often focus on the environment and governance, while the social element – related to people, communities and workforce – has not been systematically integrated into financial strategy.

This gap not only poses a challenge, but also opens up opportunities for CFOs in Vietnam to pioneer in connecting social performance with financial performance and sustainable development.

The Big Picture: When the “S” in ESG Becomes a Strategic Lever for CFOs

As global businesses are increasingly measured not only by profits but also by their impact on society and the environment, the “Social” element of ESG is emerging as a strategic priority – especially for the role of the Chief Financial Officer (CFO).

The World Business Council for Sustainable Development (WBCSD) and the United Nations Development Programme (UNDP) have released the Vietnamese translation of the guide “Advancing the 'S' in ESG”. This is not only an important guide to help Vietnamese CFOs understand and integrate social factors into their financial strategies and business operations.

Advancing the 'S' in ESG - Connecting the social element of ESG to financial strategy
Connecting ESG social factors to financial strategy

Why is the “Social” element in ESG a strategic priority for Vietnamese CFOs?

The global business landscape is witnessing a dramatic shift to “stakeholder capitalism,” which means that businesses are no longer focused solely on shareholder returns but must also consider the interests of employees, communities, and the environment. As Larry Fink, Chairman and CEO of BlackRock, has emphasized, companies today need to have a social purpose to thrive.

Growing expectations from investors and consumers about the social impact of businesses are reshaping the entire business landscape.

In addition, the international legal system is increasingly focusing on ESG-related regulations, typically the European Union's Corporate Sustainability Due Diligence Directive (CSDDD). These regulations are creating a ripple effect, affecting Vietnamese export enterprises. Vietnam itself has also demonstrated a strong commitment to sustainable development and is gradually building ESG-related regulations.

It is important for CFOs to recognize that social issues are no longer separate from financial results. They are increasingly recognized as key drivers of long-term value. Research has shown that inequality can undermine business performance, while companies that lead on human rights and good working conditions tend to outperform in revenue and job creation.

This shift is not just a moral issue, but a fundamental shift in expectations about how businesses operate, with direct implications for financial performance.

The growing interest of stakeholders in social factors means that companies that ignore this aspect risk losing investor confidence, facing consumer resistance and struggling to attract talent, all of which negatively impact profits.

The development of global regulations also brings both challenges and opportunities for Vietnamese businesses, especially export industries. While compliance with new regulations may require initial investment, proactive early adoption can provide a competitive advantage by meeting the needs of international customers and ensuring market access.

In Vietnam, this trend becomes more urgent under the impact of:

  • Pressure from global supply chains: Vietnamese exporters are facing stricter requirements on labor ethics, human rights, and gender equality – especially from the EU and international partners.
  • National commitment to sustainable development: Vietnam has begun to enact domestic ESG policies. CFOs cannot stay out of the game.
  • Direct impact on financial performance: Companies that invest in human rights and working conditions often outperform their bottom lines. Conversely, ignoring social factors can lead to a loss of investor confidence, difficulty attracting talent, and increased operational risk.

The CFO's changing role to include ESG leadership requires new skills and perspectives

Social performance is no longer an expense or charity – but an investment that generates returns, through:

✅ Improve productivity and work morale
✅ Reduce legal and communication risks
✅ Increase access to export markets
✅ Strengthen your employer brand and trusted supplier

“Promoting the ‘Social’ Element in ESG”: A Handbook for Vietnamese CFOs

“Advancing the 'S' in ESG” is a practical tool to help CFOs shift their mindset from “social reporting” to “financially aligned social performance management.”

This document is designed to help business leaders understand, navigate and plan for the social and natural impacts across their entire operations.

Some notable strategic points:

Three strategic questions for CFOs

  1. What needs to be measured? – Impact on workers, communities, consumers.
  2. Who is the focus? – 4 key stakeholder groups: internal workforce, supply chain workers, affected communities, and end customers.
  3. How to integrate? – Connect social data with financial metrics, in an integrated reporting framework.

Social Performance Assessment Framework – Two Pillars

  • Social behavior assessment: Focus on the actions of the board and senior leadership in realising commitments to corporate culture, the quality of risk identification and assessment, and the promotion of sustainable behavioural change.
  • Social Outcome Assessment: Emphasize setting strong and credible targets and KPIs, focusing on metrics related to workplace inequality, and using sentiment or “voice” data to better understand stakeholder experiences.

CFO: Creating sustainable value through social performance

The role of the CFO is undergoing a dramatic shift from one focused solely on financial numbers to a holistic “value architect” focused on long-term value creation, including ESG factors. Today’s CFOs are expected to build a value story that integrates ESG factors and outline a business plan that combines financial and non-financial value. They are also responsible for managing investor relations and addressing pressures related to ESG performance.

Strong social performance can deliver a number of specific financial benefits:

  • Lower cost of capital: Investors increasingly favor companies with strong social commitments, resulting in lower borrowing and capital raising costs.
  • Better market access: International markets are increasingly demanding in terms of social standards, meeting these standards helps businesses maintain and expand their markets.
  • Higher resilience: Companies that focus on employee well-being and good community relations are often better able to weather crises and disruptions.
  • Improved operating efficiency: Improved labor practices and active stakeholder engagement can lead to higher productivity and reduced operating costs.
  • Enhanced brand value and reputation: Positive social performance helps build a strong brand image, attracting customers and investors.
  • Access to capital and green finance: Financiers are increasingly prioritizing projects and companies with positive social impact, opening up green finance opportunities.

Conversely, passively managing social performance can lead to risks such as reputational damage, supply chain disruptions, and loss of market share. A proactive focus on social innovation can create new business opportunities and drive inclusive growth. Active stakeholder engagement is key to building long-term business resilience, and integrating human rights and environmental due diligence builds trust with stakeholders.

The changing role of the CFO to include ESG leadership requires new skills and perspectives that go beyond traditional financial expertise. CFOs need to become proficient at understanding and communicating the value of non-financial factors such as social performance to investors and other stakeholders.

Vietnam context: Overcoming challenges, seizing opportunities

The level of awareness and application of ESG in Vietnamese enterprises is still different. There is a significant gap between goals and actions in implementing ESG, with large enterprises and foreign-invested enterprises (FIEs) often taking the lead in this area.

The implementation of the “Social” element in Vietnam faces a number of specific challenges:

  • Lack of awareness and understanding: On ESG principles and regulations.
  • Lack of resources and expertise: In ESG implementation and reporting.
  • Incomplete legal and regulatory framework: About ESG and green finance.
  • Difficulties in accessing green capital: For ESG initiatives.
  • Lack of standard reporting framework: And inconsistencies in reporting practices.
  • Risk of “greenwashing”: If ESG is only implemented in a formal way.

However, Vietnam also has great opportunities to promote the “Social” element in ESG:

  • Increasing Government Focus: Into sustainable development and commit to achieving net zero emissions.
  • Pressure from international markets and investors: On compliance with ESG standards.
  • Potential to gain competitive advantage: By pioneering in the ESG field.
  • Support from international organizations: Like WBCSD and UNDP.
  • Focus on ESG training and skills development.

Raising awareness and supporting small and medium-sized enterprises (SMEs) in effectively integrating ESG, especially the social dimension, is crucial to achieving national sustainable development goals and enhancing the overall competitiveness of the economy. The evolving regulatory landscape, while currently challenging, demonstrates the government’s growing commitment to sustainable development, promising a more conducive environment for ESG adoption in the future.

Leading by Action: Steps for Vietnam CFOs

To promote the “Social” element in ESG, Vietnamese CFOs should take the following steps:

  • Read the document “Advancing the 'S' in ESG” carefully: Use this document as a foundation for understanding and implementing social performance integration.
  • Prioritize key social issues: Conduct an assessment of the significance of social issues relevant to business operations and stakeholders.
  • Develop clear goals and KPIs: Establish measurable performance indicators to track progress.
  • Integrating social performance into risk management: Identify and manage social risks that may impact finances.
  • Enhanced data collection and reporting: Invest in systems to collect reliable data on social indicators.
  • Promote inter-departmental cooperation: Collaborate with other departments to integrate social elements into the entire organization.
  • Actively engage with stakeholders: Establish regular dialogue and feedback mechanisms.
  • Looking for green and social finance opportunities: Explore sustainable funding sources.
  • Investing in training and capacity building: Raise ESG awareness among finance teams and related personnel.
  • Lead by action and advocate for policy: Pioneer in promoting the “Social” element and participate in efforts to build supportive policies.

If ESG used to be the playground of the CSR or sustainable development department, today, It is the CFO who is responsible for putting social performance at the heart of financial strategy.This not only helps businesses develop more sustainably, but also increases their readiness to meet the demands of the market, investors and global supply chains.

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