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Friday, 18 May 2018 10:11
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Impacts of green consumption on Vietnamese enterprises

(LLCT) - Green consumption trends are becoming more and more popular in the world. For Vietnam, catching up with this trend will create opportunities for sustainable development, expanding market share, as well as taking advantage of government support for businesses. However, green consumption also faces varied challenges including how to address the relationship between profitability and green growth, or how to gear State incentive policies to green production and consumption. Therefore, there should be solutions to promote green consumption, ensure sustainable development, and catch up with this global trend.

Key words: Green consumption, enterprises, Vietnam.

1. The current trend of green consumption in Vietnam

Green consumption has been quite common in developed countries. It has made initial progress in developing countries as individual incomes and consumption awareness are increasing. Consumers are becoming increasingly concerned about the environment, thus paying more attention to environmentally friendly buying behavior. Environmental experts see green consumption as a way to “rescue the earth” against the adverse changes of global habitat. Therefore, the trend of production and use of environmentally friendly products is expected to grow strongly in the coming time.

Vietnam is carrying out a number of activities related to sustainable production and consumption, in which green consumption has been paid more attention. Many relevant documents have been promulgated such as: International declaration and National action plan on sustainable production and consumption (1999), legal documents relating to the protection of consumers’ interests; Law on economical and efficient use of energy; International Declaration on Cleaner Production (1999),... programs related to green products such as the Eco-Labeling Program (Ministry of Natural Resources and Environment), Energy Saving Label (Ministry of Industry and Trade), Eco-label for tourism, are also deployed.

Vietnam’s socio-economic development strategy for the 2011 - 2020 period has confirmed the urgent need for a shift towards sustainable consumption in order to protect and improve the quality of the environment, actively dealing with climate change with following contents: to improve the sense of environmental protection, attaching the tasks and objectives of environmental protection to socio-economic development; to attach importance to the development of green, environmentally friendly economy; to implement sustainable production and consumption; to step by step develop clean energy, clean production and consumption(1).

The Sustainable Development Strategy for the 2011 - 2020 period also states that in order to implement sustainable production and consumption, it is necessary to promote the wider application of cleaner production in order to improve the efficient utilization of natural resources, materials, energy and water, while minimizing emissions and limiting the level of pollution, protecting the quality of the environment, human health, and ensuring sustainable development(2).

The Prime Minister’s Decision No. 1393 on “Approving the Green Growth Strategy in the 2011 - 2020 period with a vision to 2050” points out two tasks related to green consumption, i.e. greening of production and greening of consumption. The Green Growth Strategy forms an important legal basis to develop policies related to green consumption in Vietnam in the coming period. Thus, transforming consumption paradigm to a green and sustainable one has become the guiding principle, viewpoint and policy of the Party and the State and becomes a fundamental content of the current development objectives in Vietnam.

Guidelines, policies and action plans on green consumption have been developed in many localities throughout Vietnam, initially achieving good results, attracting a large number of participants.

From 2010 to 2017, Ho Chi Minh City successfully organized eighth annual green consumption campaigns. Specifically, more than 70,000 volunteers participated in the campaign, more than 4 million people committed to respond to green consumption, consumption of green products increased from 40%-60% during the month the campaign launched at the Co.op mart supermarket chain. The above numbers partly reflected the widespread influence of the campaign in the community, greatly encouraging the executives and businesses to persist in their activities. Besides, this campaign and its practical activities will contribute to encouraging enterprises to consciously comply with the Law on Environmental Protection, improving the livelihood of the people, ensuring the goal of sustainable development(3).

A project that is considered the focus of the 8th consuming green products campaign in 2017 was the launch of the game to identify Vietnamese products - green products on the App store. This software shows the products of green businesses and also normal businesses, enterprises have not done well in environmental protection. Players need to quickly choose which products are green, if the right choice is 80% - 100%, they will be gifted a green product or handmade recycled product.

Hanoi has launched the Green Destination Network program aimed at raising awareness of businesses and consumers about the production and use of environmentally friendly products and services. The program bridges entrepreneurs and consumers, promising to form a credible, environmentally responsible green community.

2. Business opportunities with the trend of green consumption

First, consumers are willing to pay for green products.

In the process of industrialization and modernization, Vietnam’s economic growth is relatively high, leading to improved consumption of people and increased consumers’ awareness. Green products and products of standard and environmentally friendly quality have gradually become practical needs of the people.

Nielsen Vietnam’s survey results released at the seminar “Brand Strategy in association with green development” shows that Vietnamese consumers are more and more concerned about “green” and “clean” issues. They are willing to pay more for “green” and “clean” brands. Specifically, up to 80% of consumers are concerned about the long-term effects of artificial ingredients and 79% are willing to pay extra for products free from undesirable ingredients(4).

Consumers put their trust in products of clear origin and good quality. Therefore, the “green” quality will become a competitive advantage for businesses to better gain market share. The brand development in association with the “green” factor - the use of materials, friendly technology, the introduction of “clean”, environmentally friendly products, plays an increasingly important role in the development strategy of enterprises.

In line with that trend, many businesses have seized this opportunity to promote their brand and improve business efficiency by building brand trust through commitment to social and environmental responsibility, placing consumer health issues into the focus of product development, linking product development with a commitment to sustainability.

The survey also showed that clean brands and brands committed to green and clean products enjoy profits four times higher than those of their peers. In the beverage industry, the growth rate is 2-11%. Some Vietnamese brands such as electric light bulbs, Ecopark, Unilever have high growth rate thanks to “green” production; Specifically, Unilever has grown by 30% on its commitment to “clean” products.

Second, there are incentives for businesses participating in Vietnam Green Label program.

Vietnam Green Label is the eco-label program implemented since 2009 with the goal of continuously improving and maintaining the quality of the living environment through minimization of energy use and consumption, materials as well as types of waste generated by the production, trading and consumption of products and services for life.

The State has introduced a clean development policy towards the production and consumption of environmentally friendly products. On the other hand, it plays the role of a big consumer, stimulating the demand of environmentally friendly products. When the State implements this policy, sustainable production and consumption is promoted facilitating favorable conditions for producers to invest in environmental protection, reducing pollution emission and improving environmental quality, reducing the cost of treating environmental pollution. Accordingly, green industries are developed in combination with the efficient use of raw materials and energy, preserving and increasing the value of natural capital and improving the quality of life.

According to regulations, establishments producing and trading eco-friendly products, which are affixed with the Vietnam Green Label, shall enjoy preferences and supports on land and capital; exemption or reduction of taxes and fees on environmental protection. These incentives will encourage businesses to be eco-friendly in their products to create a double benefit for the business. On the one hand, enterprises are entitled to preferential treatment from the State for eco-labeled products. Moreover, consumers currently are not only interested in quality, design, price, but also consider the health and environmental factors of the product - all factors in the products labeled eco. Therefore, the enterprises will have opportunities to gain their markeshares. It can be said that Vietnam Green Label is a green certificate for companies to stand firm in the domestic market, as well as to grobal market, especially environmental friendly market like the EU or America.

It can be said that Vietnam Green Label will be the target of the business and consumption habits of consumers. Businesses going for eco-label are to ensure market share which is accompanied by profits, consumers going for eco-label are to ensure safety during use. When consumers have high requirements for quality and safety for human health and the environment, they will become a driving force for manufacturers and businessmen to supply environmentally friendly products which is labeled ecological.

In addition, when implementing the Green Label program, enterprises have built a brand reputation in compliance with the law of Vietnam, especially the law on environment and labor; thereby creating a competitive advantage, meeting the requirement of strict environmentally friendly markets; showing responsibility for the community and improving profitability and creating sustainable development of enterprises.

3. Difficulties and challenges for enterprises in the trend of green consumption

First, the business has not resolved satisfactorily the conflict between profit and green growth.

The biggest difficulty of businesses, especially small and medium ones, is the conflict between two objectives: profitability and green growth. Most small and medium enterprises lack capital for investment in green products. In addition, in the world, although green technology has been developed, the application in Vietnam still has many limitations. Advanced technology can be transferred to enterprises, but human factors, and competency do not catch up with the trend. The contradiction above makes businesses not boldly go for green sustainable products, but are only interested in profits. In addition, the investment and the high initial cost greatly affect the access to green technology. According to a survey of the Ho Chi Minh City University of Technology, in Ho Chi Minh City, 70% of businesses surveyed have not heard of the Green Label certification of Vietnam; more than 50% of businesses do not care about climate change; 60% of businesses are not willing to invest in green products(5).

For example, in the field of construction, Vietnam has about 61 projects certified by local and foreign organizations as green buildings. This amount is very modest compared to the potential of the market. Notably, new green buildings only appear in the high end segment and are built by multi-national corporations with the goal of promoting their visibility, branding and reducing operating costs.

Second, there is a lack of supportive policies for green businesses.

In addition to dealing with inventory, seeking and expanding markets, brand protection, access to loans, etc., enterprises will have to pour a relatively high amount of initial capital into green projects. However, there are currently no incentives for businesses to access loans for green development, while no resources are available for the implementation of the Government’s 2030 Sustainable Development Agenda in the medium term. Many businesses are not yet deeply concerned with green development.

According to the survey conducted by Ho Chi Minh City University of Technology, 89% of respondents said they did not receive the support and incentives from the State in the process of producing and trading green products. Only 26% of the respondents said they received the support from manufacturers and distributors for green products.

Third, the environmental responsibility of the businesses is limited.

Economic experts say that efforts by the regulators are not enough and more importantly, there is a need for consistency from consciousness to action of all entities involved in the economy. If enterprises do not give up the mode of business solely for quick profits, replacing it with the focus on sustainable development, when the trade agreements with strict regulations go into effect, the risk of bankruptcy becomes imminent.

According to the Ministry of Natural Resources and Environment, average natural resource and emission costs of Vietnamese enterprises are generally higher than those of the region and the world. Water usage in many industries is very high and wasteful. For example, to produce a paper product unit, it requires over 500 m3 of water, which is five times higher than the world average (approximately 100 m3 / ton). Wastage of the food processing industry is threefold to fourfold in comparison with that of the world. Energy costs in the industry are also relatively high: paper industry consumes 1,200 kWh and 1,500 kg of coal per ton of bleached paper; steel industry needs 700,000 kWh / ton of pig iron and 25 kWh / ton of refined iron.

Meanwhile, given the strong economic development momentum over the past 10 years, many consumers’ habits, especially in the younger generations, have become one of the direct or indirect causes of the claimed resources, exhausted water, polluted environment, ecological imbalance and unsustainable development. The implemented activities have stopped at the level of public awareness in the use of eco-products, eco-bags, 3R and are single and unconnected activities, the scope of impact is still within the framework of a direct beneficiary group, thus there is no universality and sustainability.

4. Measures to promote green consumption

Green development will be a strategic way for enterprises to develop sustainably in the increasingly competitive conditions. For a company to grow green, there must be consensus from the employer to the employees. Leadership of the company must be the pioneer in its green development, thus changing the way of thinking and action of individual employees. Specifically, companies need to actively renovate technology, develop clean energy sources, renewable energy, produce technologies that saving resources, consume little energy and are environmentally friendly.

For businesses with little capital, in order to realize green development objectives, it is not necessary to invest in modern equipment, they may adopt simple actions such as complying with environmental protection regulations, improving production processes to reduce raw materials, power and consumption using environmentally friendly inputs.

Regarding the State, it is imperative to improve the legal system and policies so that they are synchronous and consistent with the green development orientation. Specifically, policies should be introduced to encourage the production of green products and services; to develop clean industries and fields; to promote green production, prioritize policies and action plans for renewable energy development, thrifty and efficient use of resources, green technology development, clean development mechanism (CDM).

In addition, it is necessary to develop and replicate green business models, support prices for green products and services, strengthen marketing and advertising products. Organizing a training program on green manufacturing for the workforce that directly participates in green business models. Promoting consumer demand for green products, improving the environmentally friendly consumption habits, creating close relationships between green producers, green products and green consumers.

Simutaneously, it is necessary to raise the people’s awareness about the meaning and importance of green consumption to the environment, the health of individuals and communities. Then they should actively mobilize relatives and families to carry out green consumption behavior. This is the responsibility and honor of each person in society. In order to develop a green economy, sustainable development, it is essential that each and every one of us needs to change our minds and actions, and the whole society to accompany the enterprises in environmental protection activities.

______________________

l Endnotes:

(1) https://vov.vn.

(2) http://chinhphu.vn.

(3), (5) http://www.sggp.org.vn.

(4) Agricultural products market, Industry and Trade Information Center - Vietnam Ministry of Industry and Trade, April 2017, p.6.

Dr. Ho Thanh Thuy

Institute of Political Economy,

Ho Chi Minh National Academy of Politics

 

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