Towards net zero

Vietnam is one of five countries most affected by climate change. According to its National Strategy on Climate Change to 2050, issued by the government, total national greenhouse gas emissions are to fall by 43.5 per cent by 2030. The five sectors of energy, agriculture, forestry, waste, and industry must sharply cut their carbon emissions during the production process. Vietnamese businesses have become a lot more proactive in waste reduction and circular practices to promote the economy’s green transition.

Not just a trend; a choice

Consistently pursuing growth in association with environmental conservation, Vinamilk has determined that corporate responsibility is not only strict compliance with legal regulations on waste management but also the optimal consumption of resources and improving the level of reuse and recycling of waste from the product design stage to the distribution and consumption stage. It focuses on collecting and sorting waste at the source, actively renovating production lines, investing in environmentally-friendly technologies, and building a circular economy, thereby contributing to reducing emissions and greenhouse effects. At its dairy cattle farms, waste treatment is a top priority to protect the environment.

“At Vinamilk, the circular economy is associated with goals in environmental protection and sustainable development, notably the economical and efficient consumption of resources, minimizing and eventually eliminating all types of waste polluting the environment,” a Vinamilk representative told VET. “As a result, in 2022, Vinamilk strived to implement many activities to transform its linear economy to a circular economy, in which efforts were made to convert chemicals into resources, reduce the consumption of input materials, and utilize environmentally-friendly materials that can be reused and recycled or that easily decompose, in order to minimize adverse impacts on the surrounding environment.”

Also involved in the agricultural sector, the PAN Group has committed to and invested in implementing low-emissions agricultural solutions. This stems from actual requirements in its production and business activities.

The government has made national commitments and encouraged businesses to make more important contributions to the implementation of the sustainability program. The agricultural sector accounts for 19 per cent of total emissions in Vietnam, and ranks second on the list of industries that are the largest emitters, after the electricity and energy industry. The government has introduced requirements for businesses to conduct inventories and report on their greenhouse gas emissions. Additionally, under Decision No. 01 and an updated list, there are 2,893 establishments that must conduct greenhouse gas inventories in their emissions reduction roadmap from now to 2030.

“The business environment increasingly requires stricter compliance with environmental standards and resource management,” said Mr. Nguyen Trung Anh, Sustainable Development & Innovation Director at the PAN Group. “Though no business is required to submit a greenhouse gas inventory report, implementing a low-emissions agricultural model can help PAN comply with regulations and requirements from the government.”

In addition to legal requirements, pressure from international customers cannot be ignored. This is true in high-end markets such as the EU, where customers demand information on the carbon footprint of seafood products. They are increasingly aware of and place a high level of importance on carbon footprint declarations, and even make specific requirements such as controlling catches and encouraging carbon footprint declarations on products. The EU has approved the Carbon Border Adjustment Mechanism (CBAM) for a number of specific goods such as steel, cement, chemicals, and fertilizers, and such trends will continue to expand to other fields. The CBAM mechanism imposes a carbon price on imported goods based on the greenhouse gas emission intensity of the production process, and requires that Vietnamese enterprises exporting these goods conduct a greenhouse gas inventory.

“Circularity not only helps save on production costs but also reduces emissions and negative impacts on the environment, increases revenue and profits, penetrates and expands the high-end market, and boosts opportunities to receive investment,” Mr. Trung Anh added.

Throughout its development journey, in addition to its mission of providing “green vehicles” for a sustainable future, VinFast also pays great attention to effective management and waste reduction towards production under a circular economic model. It has implemented waste reduction programs under the principle of Reduce waste at source - Reuse - Recycle. The company’s recycled waste rate is increasing year after year. In 2021, 69 per cent of generated waste was recycled, and in 2022 and 2023 the rate was 81 per cent and 86 per cent, respectively. Investing in advanced production lines has resulted in the company maximizing its water savings.

On December 5, 2023, VinFast signed an MoU with Japan’s Marubeni Corporation on cooperation in researching and manufacturing SES storage battery systems from used electric vehicle batteries. The two parties will also collaborate to promote business opportunities in the used electric vehicle battery sector, marking an important step in VinFast’s strategy to establish a circular economy.

A VinFast representative told VET that the transition to a circular economy is inevitable in all countries around the world, including Vietnam. One of the key motivations for VinFast to carry out waste reduction activities towards a circular economy model is the growing recognition of the importance of sustainability in business operations. In the current context, demand for raw materials is increasing while these resources are being depleted, especially non-renewable resources such as minerals. So becoming a link in the circular economy is a choice by VinFast.

“With an ever-expanding production scale, efforts to proactively reduce waste and move towards a circular economy model can make a difference, giving VinFast a competitive advantage,” the representative said. “Overall, the decision to embark on waste reduction activities towards a circular economy model was driven by a combination of many factors, including the recognition of sustainability as a key in creating our long-term value to maintain the trust of our stakeholders.”

To enhance the management, recycling, and reduction of plastic waste that pollutes the environment and oceans, DUYTAN Recycling (DTR) has built a factory providing high quality recycled plastic products with “Bottle-to-Bottle” technology. Each used plastic bottle will be recycled into plastic pellets, creating a new cycle and helping reduce the use of fossil fuels in production. “DTR believes that the promotion of a circular economy in Vietnam is a crucial objective in the company’s long-term development strategy,” said Mr. Le Anh, Sustainability Director at DTR.

Long journey

Besides the opportunities and benefits, implementing waste reduction solutions towards a circular economy model also involves challenges.

One challenge DTR is currently facing is the current state of waste collection and classification in Vietnam. Most waste is not well classified at the source. Collection and recycling activities remain small and spontaneous, being mainly carried out manually in craft villages, and do not comply with environmental regulations. Packaging is still not standardized and not suitable for recycling.

The VinFast representative pointed out that investment costs in new technologies for efficiently recycling and reusing materials in automobile production is quite high. “Transitioning from the ‘produce-consume-dispose’ mindset to ‘reuse-recycle-regenerate’ is a long-term process requiring efforts from both VinFast and consumers,” he said. “In Vietnam, though there is a legal framework for developing a circular economy, new policies are only just beginning to focus on green growth and sustainable development. Transitioning to a circular economy is a challenging process, but it will help VinFast enhance its image and brand, thereby strengthening its competitiveness in the electric vehicle market, while also contributing to environmental protection and sustainable development on a global scale.”

Similarly, Mr. Trung Anh agreed that implementing sustainable technology and production processes often requires major investment, from upgrading equipment to training human resources. Businesses need to ensure that they have the financial resources to meet these costs in the initial stages.

Legal regulations and appraisal processes also create challenges for the PAN Group. For example, in order for organic fertilizer from pangasius sludge to be recognized, businesses involved will have to develop a scientific research project and conduct many tests to prove its effectiveness and biological safety. Though the results of the project are good, because it is related to environmental factors, businesses still have a long way to go to be evaluated by competent agencies, due to strict regulations on waste management and transportation.

In addition, success in implementing a sustainability plan requires a change in the way an entire organization works and thinks, accompanied by issues in changing organizational culture and ensuring a buy-in at all levels. “Sustainable production models often require facing new risks and uncertainties, such as climate change, political change, and policy shifts,” Mr. Trung Anh added. “Businesses need to have a risk management plan and ensure stability in business operations.”

According to Dr. Nam Nguyen, CEO and Founder of Klinova, a consulting and services agency on climate-related policies and other environment issues, the trend of investing with a focus on environmental, social, governance (ESG) factors in Vietnam is perceived as lagging behind global movements. The challenges faced by Vietnamese enterprises in implementing ESG practices include limited access to information, insufficient resource support, and a lack of market orientation, with information scarcity being the primary issue confronting businesses.

“ESG implementation is a commitment and a long-term process,” said Dr. Nguyen. “The prolonged effort involved in ESG practices, however, serves as evidence of a company’s commitment to operating its business in a sustainable development direction.”

Government support

The VinFast representative believes the Vietnamese Government has been providing active support to help businesses reduce waste and move towards a circular economy. Examples include promulgating policies and regulations to reduce waste and promote recycling and requiring manufacturers to be responsible for the disposal of their products at the end of their life cycle; financial incentives, such as tax breaks or subsidies, for businesses that adopt environmentally-friendly practices or invest in technologies that promote a circular economy; capacity building and education, to enhance the capacity of businesses to apply circular economy practices; support for research and development of waste reduction and circular economy solutions; and promoting sustainable consumption.

“Policies and support from the government along with the determination of businesses will soon promote the stable operations of a circular economy,” the representative added.

Similarly, Mr. Le Anh believes the government has done a commendable job of encouraging Vietnamese businesses to organize collection and recycling. Evidence of this commitment lies in the implementation of the Extended Producer Responsibility (EPR) policy, which comes into effect this year. The policy holds businesses responsible for handling and recycling waste arising from its production process.

“However, to successfully implement an EPR policy in Vietnam requires joint efforts from the government, businesses, and the community,” he said. “There is a need to streamline regulations and raise awareness about the benefits of eco-friendly products and environmental protection for both present and future generations. Through these efforts, we can contribute to promoting the circular economy, working towards environmental protection and sustainable development.”

Dr. Nguyen suggested that to encourage businesses to invest with a focus on ESG, the government needs to implement practical policies and support measures, such as establishing an official channel to provide information on ESG practices for investment, allowing businesses easy access and implementation in accordance with government recommendations; disseminating information to the public and consumers about the long-term environmental and social benefits of products supplied by manufacturers practicing ESG; and providing guidance to businesses practicing ESG in identifying export markets with demand for products supplied by ESG-compliant manufacturers.