Not long ago, ESG in the eyes of many Vietnamese business owners was a nice chapter in the annual report: good to have, no great loss without. That view is changing for companies seeking institutional capital or serving international supply chains. In our diligence work, ESG questions can arise early. Their relevance, however, varies by investor, lender, customer, sector and transaction.
Who is actually demanding ESG?
Three groups may apply the pressure, each through a different mechanism:
Institutional investors. Some regional and global funds have ESG mandates or exclusion policies set by their own investors. A company that does not meet a particular fund's criteria may face additional diligence or be outside that fund's mandate.
International supply chains. Some large brands impose supplier requirements and audits covering labour, environment and safety. For an exporter, the commercial consequence of failing a customer's audit depends on the relevant contract and remediation process.
Banks and credit institutions. Vietnam's central bank requires credit institutions and foreign bank branches to maintain internal rules for environmental-risk management in credit granting. This does not mean that a particular ESG file automatically produces better borrowing terms, which remain a matter for each lender and product. Read the State Bank of Vietnam's release on Circular 17/2022/TT-NHNN.
What all three can have in common is that ESG evidence becomes relevant to diligence. There is no universal threshold: the applicable requirements depend on the counterparty and context.
Practical ESG: start with the G, not the E
It sounds backwards, but our consistent advice is to start with governance, for two reasons.
First, governance is what an investor can verify immediately in due diligence: board composition, delegation of authority, internal control, disclosure. It is also the foundation the other two letters stand on; an environmental commitment with no governance system tracking it is a slogan.
Second, investing in G pays twice: it serves IPO readiness, fundraising and M&A at the same time. A seriously built internal control system is an investment that works in every future capital scenario.
For E and S, the practical approach is measure first, commit second: take stock of the current position (energy, emissions, labour, safety), identify the gap against the requirements of the specific investors or customers you are targeting, then prioritise whatever bears directly on revenue and on access to capital.
A four-step roadmap for companies starting from scratch
- Assess the current state. Review against a common framework that investors are used to reading. The output is a gap map: where you are, what is missing, what would cause outright exclusion.
- Prioritise by capital impact. Do not fix everything at once. Rank issues by their effect on fundraising and on orders, and deal with the "outright exclusion" group first.
- Build the data system. Without data, ESG claims carry little weight in due diligence. Set up collection and audit trails from the start so that every commitment can be evidenced.
- Fold it into the capital story. Present ESG as part of the investment case: governance reduces risk, energy efficiency reduces cost, labour standards protect the order book. Investors pay for that logic, not for an attractive report.
The Core Ventures view. Real ESG is not a compliance cost; it is a way of reducing the risk premium in your valuation. Vietnamese companies have the advantage of arriving late: they can learn from frameworks that are already standardised instead of feeling their way. The only condition is to start before the next funding round, not during it. The Core Ventures FDI and ESG advisory team works precisely on this opening stretch.
Frequently asked questions
Do small and mid-sized companies need ESG, or is it only for large ones?
It depends on where your capital and your customers come from. Selling domestically on your own funds may present a different set of expectations from exporting, operating within an international supply chain, or planning an institutional raise. Check the requirements of the actual counterparty rather than assuming one standard applies to all companies.
How long does ESG take before it is "good enough" to raise capital?
There is no single benchmark; every investor has a different appetite. In practice: the basic governance layer takes a few months to a year to build seriously, and the E and S data systems need at least one reporting cycle to produce credible numbers. Starting twelve months before a funding round is a safe marker.
Is the cost of ESG justified for a company with no immediate plans to raise?
Separate the "must do" from the "should do". The basic governance and compliance layer supports a healthy operation regardless of funding plans. Deeper investment in certifications and international-standard reporting should follow a clear commercial, customer or capital requirement. If you are not sure which group you are in, a preliminary conversation can help identify the relevant questions.
A practical note. ESG expectations are set by the people and contracts involved in each deal. Use this article to frame the questions, then check the requirements with the relevant lender, investor, customer or adviser before committing resources.