Green transformation - the challenge of businesses in sustainable development

	Note for businesses when converting green and digital
	The important “puzzle piece” for green transformation

Enterprise production needs to move towards green and sustainable production. Illustration photo: P.U

Pressure on businesses

According to statistics from the Ministry of Industry and Trade, the industrial sector currently accounts for more than 50% of the total energy consumption nationwide. The potential for energy saving in industry can reach 20 - 30%. Currently, the country has 3.068 key energy-using establishments with energy consumption of 1,000 TOE (tons of oil equivalent) equivalent to six million kWh of electricity/year or more. These enterprises have an average electricity consumption of 80 billion kWh/year. If these establishments only need to save at least 2% of their annual electricity consumption, the whole country will save about 1.6 billion kWh of electricity annually (equivalent to saving more than 3,200 billion VND in electricity costs).

Director of the Department of Energy Conservation (Ministry of Industry and Trade) Nguyen Thi Lam Giang said that the use of electricity and energy saving and efficiency is increasingly playing an important role in ensuring electricity supply, protecting national energy resources, protecting the environment and mitigating the impact of global climate change. Energy saving policies are encouraging and promoting businesses to implement advanced management and technology solutions, bringing to market products with outstanding technical features and high energy efficiency, contributing to promoting energy saving, transforming the green economy towards sustainable development.

Ms. Pham Thi Ngoc Thuy, Director of the Office of Private Economic Development Research (Department IV) said that the first thing is to comprehensively improve institutions and policies to support businesses in green transformation, including reviewing existing policies and legal regulations to change them to suit the transformation trend, in line with the recycling and circular economic model... Green classification standards, green project portfolios, green credit/bond regulations, designs on medium and long-term capital flows need to be issued soon and instructions for implementation and deployment should be provided quickly so that businesses can access the necessary and appropriate capital sources.

Enterprises struggle with financial problems in green transformation

The survey report on the readiness and difficulties of enterprises in green transformation by the IV Board recently released shows that capital is the biggest difficulty that enterprises encounter in the process of reducing emissions and green transformation. 50% of surveyed enterprises said that they encountered difficulties in capital and only 5.9% said that they had no difficulties in capital.

Enterprises in the industrial sector; agriculture, forestry and fishery faced more difficulties with the rates of 53.7% and 52.9%, respectively. Domestic enterprises encountered more difficulties in capital than FDI enterprises (50.3% compared to 46.6%). Medium-sized enterprises encountered the most difficulties in capital compared to small and large-sized enterprises 62.7% of enterprises with revenue from 1,000-1,500 billion VND said that they encountered difficulties in capital.

According to Board IV, this is an issue that needs special attention because while businesses are in great need of capital for emission reduction and green transformation to seize opportunities, green finance has not developed accordingly. After more than ten years, green finance has been deployed in Vietnam but the scale is small, green credit accounts for only 4.5% of total outstanding loans (data from the State Bank as of the end of 2023 - PV), while green bonds are very few.

As of December 31, 2023, only 47 credit institutions have generated outstanding green credit with nearly VND 621 trillion, an increase of 24% compared to the same period in 2022, accounting for about 4.5% of total outstanding loans of the whole economy. Green credit is currently mainly focused on renewable energy, clean energy (nearly 45%) and green agriculture (nearly 30%).

The implementation of green credit has many obstacles such as the lack of a legal framework and overall policies while the lending sources of credit institutions are often short-term and medium-term mobilized capital and borrowers require preferential interest rates. With green bonds, there is a lack of detailed instructions from competent authorities (information, criteria on green projects); management and monitoring mechanisms for the use of capital; legal framework...).

Using energy economically and efficiently will help manufacturing enterprises reduce energy costs, reduce greenhouse gas emissions and enhance the competitiveness of goods and products, especially exports when Vietnam has deeply participated in international integration. Mr. Nguyen Thanh Ha, energy expert, RCEE-NIRAS Joint Stock Company, said that Vietnam has made very strong commitments on the use of energy economically and efficiently, especially in the field of environmental protection, committed to zero net emissions and is facing challenges in developing very quickly and strongly. Not only in the energy sector, Vietnamese enterprises are also facing an increasing challenge in "greening" their production activities. This requires enterprises to produce more environmentally friendly products while ensuring social responsibility. Both partners and customers are setting higher requirements, forcing enterprises to meet them if they want to deeply integrate into the international market.