Vietnam
Contributing law firm: YKVN
Contact: Nguyen Van Hai, Partner
Krissen Pillay, Counsel
ESG in APAC - Vietnam by YKVN
Please click on the podcast above for a snapshot of the three key themes of ESG reporting, transition planning and greenwashing in respect of Vietnam. Scroll down for further information on each key theme.
A. ESG Reporting
1. Are there legal or regulatory requirements for companies to make ESG disclosures in your jurisdiction?
Yes. ESG disclosures are governed by legislation applicable to specific regimes, principally environmental laws and corporate governance laws.
2. What are the key legislative and regulatory sources for ESG disclosure requirements and to whom do they apply?
The Ministry of Finance has issued Circular 96[1] that requires certain public disclosures to be made which include disclosures in respect of GHGs, resource management, energy consumption, water consumption, compliance with laws on environmental protection, policies related to employees, responsibility to the local community and reports related to green capital market activities. These disclosures are imposed on (a) public companies (whether listed or not), and (b) companies that publicly offer or have corporate bonds listed.
Decree 47[2] provides that state-owned enterprises must publicly report on their performance of public interest tasks assigned to them in terms of a plan or bidding, including the following information:
(a) Responsibility for environmental
protection;
(b) Responsibility to contribute to the social
community;
(c) Responsibility to suppliers;
(d) Responsibility to ensure the interests and safety of consumers; and
(e) Responsibility to ensure benefits for shareholders and employees in the enterprise.
Decree 08 requires that companies that issue green bonds shall make an annual public disclosure on assessment results of the environmental benefits of the projects using capital raised from issuance of the green bonds.[3]
Moreover, certain voluntary tools apply, such as the Vietnam Sustainability Index (which indexes the top 20 listed companies in respect of sustainability scores on the Ho Chi Minh Stock Exchange). It is implicit that disclosures would be required in order to be included in the index.
3. Are the requirements mandatory or do they apply on a comply-or-explain basis?
Circular 96 and Decree 47 are both mandatory.
4. Which aspects of ESG do the requirements focus upon?
Circular 96 has a general focus on corporate governance, thereafter with specific categories skewed more towards environmental than social aspects. Decree 47 has significant focus on social responsibility.
5. Are the disclosure requirements based on international standards? If so, which one(s)?
The following standards are the common frameworks that form the basis of sustainability reporting as well as relevant guiding documents:
(a) GRI Standard;
(b) International Finance Corporation;
(c) International Integrated Reporting Council; and
(d) ISO 26000:2010.
6. Are there any mandatory requirements for the disclosure of Scope 3 GHG emissions?
Every 2 years, GHG-emitting establishments (not necessarily based on Scope 3 GHG emissions) which are specified in a list issued by the Prime Minister[4] (Specified Establishments) are subject to a GHG inventory (kiêm kê khí nhà kính in Vietnamese) and must report certain operation and inventory information. These establishments are heavy emitters and form part of sectors that traditionally result in significant emissions (e.g. energy, industrial processes).
7. Are there assurance requirements?
Assurance is not mandatory.
8. Are voluntary ESG disclosures customary?
No.
9. Is there a local taxonomy? Is it mandatory and what is its scope of application?
No. In broad terms, there is no taxonomy regime in respect of ESG. However, numerous actors such as the GIZ Macroeconomic Reforms/ Green Growth Programme or the Institute of Strategy and Policy on Natural Resources and Environment (ISPONRE) have been motivating the implementation of such classification. We note that the ASEAN Taxonomy for Sustainable Finance may be utilised.
10. Are there plans to adopt the ISSB sustainability and/or climate-related disclosure standards? If so, to what extent will the standards be mandatory, to whom will they apply and what is the timeline?
No.
11. Other upcoming developments / direction of travel
The Prime Minister has issued Decision No. 167/QD-TTg approving the “2022-2025 program to support private sector enterprises in sustainable business” with (a) general objectives relating to 17 sustainable development goals by 2030, and (b) specific objectives relating to sustainability awareness. These objectives strongly connect with, and may be seen as a part of, ESG development.
B. Transition planning and net zero
1. Has your jurisdiction set decarbonisation targets and strategies?
Yes. At the 26th United Nations Climate Change Conference of the Parties (COP26) in December 2021, Vietnam set out a goal of achieving net zero emissions by 2050.
In order to adopt this, in July 2022, the Government issued the National Climate Change Strategy to 2050 (Decision No. 896/ QD-TTg dated July 26, 2022 of the Prime Minister) which set outs the general target that Vietnam will reduce GHG emissions under the goal of net zero emissions by 2050. The specific goals include ensuring that:
i. by 2030, total national GHG emissions
are reduced by 43.5%;
ii. emissions peak will be reached in 2035; and
iii. by 2050, total national GHG emissions
reach net zero emissions.
The National Climate Change Strategy to 2050 sets out the strategies for reduction of GHG emissions for each sector. As an example, the energy sector promotes clean energy development, economical and efficient use of energy and use of breakthrough technology solutions.
2. Are there carbon trading markets? If so, please give details. If not, are there plans for such markets?
No. Vietnam has not officially launched a domestic carbon trading market, though has adopted plans to form a domestic carbon credit trading market by 2030, to be operated and connected to regional and global carbon markets[5]. A roadmap has been developed in respect of this.[6]
As part of the development process, Quang Nam Province has been approved by the Government to develop a pilot project on trading forest carbon credits (implemented from 2021 to 2025). Gia Lai Province is planning to develop, and seek approval for, a similar pilot project.
3. Are there mandatory requirements for transition plans and/or their disclosure? If so, please give details (including whether there is any standard or guidance on transition plans and/or requirement to consider the social impact of the plan). If not, are there plans for such requirements?
Yes, in relation to certain companies. The Law on Environment Protection[7] requires Specified Establishments (as mentioned in Q&A A.6) to (a) formulate and implement annual GHG emission reduction plans, and (b) integrate GHG emission reduction activities with quality management programs, cleaner production programs and environmental protection programs. The reduction plan regime includes a reporting mechanism to the Ministry of Natural Resources and Environment, other related ministries and ministerial-level agencies, and the provincial People’s Committee, with annual reporting thereafter. The reporting is however not public.
For public companies, the annual report required in terms of Circular 96 (see above Q&A A.2) contains certain disclosure requirements overlapping with the GHG emission reduction plan (e.g., total GHG emission, measures and initiatives to reduce GHG emission).
Furthermore, enterprises that manufacture products containing or using ozone-depleting substances and/or controlled greenhouse effect substances (as identified by the Government) are obliged to develop an appropriate roadmap to replace and eliminate such substances (in accordance with treaties to which Vietnam is a party)[8].
4. Are there mandatory requirements to set, meet and/or disclose climate-related targets? If so, please give details. If not, are there plans for such requirements?
Yes, in relation to certain companies. See Q&A B.3 above for mandatory requirements for transition and mitigation planning which will include setting certain climate-related targets for the reporting periods from 2026 onwards.
5. Other upcoming developments / direction of travel
Vietnam also plans to, by 2030, develop total GHG emission quotas and allocate GHG emission quotas to GHG emitting facilities that must carry out GHG inventory from 2026 as well as to develop and complete an online database on GHG inventory and measurement, reporting and appraisal of GHG emission mitigation activities.
Vietnam’s approach is to encourage investment into greenfield and brownfield projects to be in transformative technologies for low-GHG emission and encourage participation in mechanisms and modes of cooperation on GHG emission reduction.
C. Greenwashing risks
1. Are there any recent examples of legal proceedings, regulatory actions or investigations against or into greenwashing in your jurisdiction?
No. There have, in the past, been incidences of greenwashing which had sparked public anger. However, there have not been any recent direct proceedings.
2. Are there any laws or regulations specifically dealing with greenwashing?
Vietnam has not adopted laws or regulations specifically dealing with greenwashing, but the Law on Competition[9], Law on Advertising[10], Law on Protection of Consumer’s Benefits[11], Law on Securities[12] and the Penal Code[13] do regulate the giving of false information about the products or the enterprise itself. The Civil Code[14] allows for a claim by those suffering harm.
3. What are the likely grounds on which such proceedings, action or investigations can be instigated?
The above-mentioned principal laws would allow for proceedings, action or investigations to be instituted on the basis of false claims.
There is an intersection with corporate governance in the sense that directors could be liable for failure to adhere to their duties.
Where there is harm suffered, compensation for damages could also be another ground.
4. Other upcoming developments / direction of travel
The Vietnamese Government has gravitated towards a greater focus on sustainable development and ESG. Market participants, including a growing consumer middle class, are also more concerned with ESG. It is therefore expected that there will be greater scrutiny of greenwashing, in respect of both compliance and reporting. The needs of foreign investors are also expected to play a role.
This material is provided for general information only. It does not constitute legal or other professional advice.
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