ESG STANDARDS EXPLAINED: WHERE SHOULD BUSINESSES START?

One of the biggest barriers discouraging Vietnamese businesses from adopting ESG standards is not a lack of commitment, but the sheer number of standards and frameworks currently in use—each serving a different purpose and intended for a different audience. This article provides a structured overview of the most widely used ESG standards and frameworks today.

When exploring ESG, it is common to encounter numerous acronyms, including GRI, SASB, TCFD, ISSB, CSRD, ISO 14001 and SA8000. These ESG standards and frameworks do not replace one another; instead, they often complement and overlap with each other. Consequently, a large company operating internationally may need to comply with two or three different sets of requirements at the same time. To make the landscape easier to understand, ESG standards and frameworks can be divided into four functional groups.

1. Sustainability Reporting Frameworks and Standards

This is the most widely recognized group of ESG standards and frameworks. They specify the sustainability-related information that an organization should disclose.

 GRI (Global Reporting Initiative): Introduced in 2000, the GRI Standards are among the longest-established and most widely used sustainability reporting standards in the world. GRI adopts an “impact materiality” perspective, focusing on how an organization affects the environment, society and the economy. It is suitable for communicating transparently with a broad range of stakeholders—including customers, communities and employees—not only investors.

 SASB (Sustainability Accounting Standards Board): Established in 2011, SASB takes a different approach based on “financial materiality.” It focuses on sustainability-related risks and opportunities that may directly affect an organization’s financial performance and enterprise value. SASB provides industry-specific disclosure topics and metrics, making it particularly relevant to investors.

 TCFD (Task Force on Climate-related Financial Disclosures): Established in 2015, the TCFD focuses specifically on the financial risks and opportunities associated with climate change. Its recommendations have been adopted or referenced by many securities regulators and stock exchanges, particularly for emissions-intensive sectors such as energy, materials and transportation.

 ISSB (International Sustainability Standards Board)—IFRS S1 and IFRS S2: The IFRS Foundation established the ISSB in 2021 to develop a global baseline for sustainability-related financial disclosures, building on initiatives such as SASB, TCFD and CDSB. Its first two standards—IFRS S1, General Requirements for Disclosure of Sustainability-related Financial Information, and IFRS S2, Climate-related Disclosures—were issued in 2023. They are increasingly being adopted or referenced by jurisdictions around the world.

In summary, GRI primarily supports transparency concerning an organization’s impacts on society, the environment and the economy, while SASB and ISSB focus on information relevant to investors. TCFD specifically addresses climate-related financial disclosures. The current direction is toward greater interoperability and consolidation rather than continued fragmentation. Among investor-focused sustainability reporting standards, the ISSB Standards are emerging as a global baseline.

2. Mandatory Legal and Regulatory Requirements

Unlike most of the ESG standards and frameworks above, which are generally voluntary unless incorporated into contractual or regulatory requirements, this group is legally binding. Organizations falling within its scope have limited discretion regarding compliance.

 CSRD (Corporate Sustainability Reporting Directive)—European Union: The CSRD establishes comprehensive mandatory sustainability reporting requirements and significantly expands the scope of the preceding Non-Financial Reporting Directive (NFRD). It requires detailed reporting in accordance with the European Sustainability Reporting Standards (ESRS) and introduces mandatory independent assurance. The CSRD applies not only to EU undertakings but also, subject to specified thresholds and conditions, to certain non-EU undertakings with substantial operations in the EU. Vietnamese exporters and suppliers should therefore assess whether they are directly subject to the requirements or may face information requests from European customers within their value chains.

 CBAM (Carbon Border Adjustment Mechanism)—European Union: CBAM is the EU’s carbon border mechanism for certain carbon-intensive goods imported into the EU, including cement, iron and steel, aluminium, fertilizers, electricity and hydrogen. It directly affects Vietnamese exporters supplying covered goods to the EU market.

 Vietnamese regulations: Circular No. 96/2020/TT-BTC of the Ministry of Finance provides guidance on information disclosure, including certain environmental and social information, by public and listed companies. In addition, Decision No. 167/QD-TTg (2022) approved a programme supporting sustainable private-sector businesses and created a policy framework to encourage the adoption of sustainable business practices.

3. Sector-Specific and Management System Certifications

This group does not consist of reporting frameworks. Instead, it includes standards and certification schemes used to demonstrate that an organization meets specified management system, operational or sector-specific requirements. Two of the most widely applicable foundational standards—relevant to organizations of almost every type and sector—are ISO 14001 and ISO 45001.

 ISO 14001—Environmental Management Systems

ISO 14001 is the international standard specifying requirements for an environmental management system (EMS). It forms part of the ISO 14000 family of standards published by the International Organization for Standardization (ISO) and is one of the most widely recognized standards supporting the Environmental pillar of ESG.

ISO 14001 does not prescribe fixed environmental performance levels that every organization must achieve. Instead, it requires the organization to establish a systematic management framework. This includes identifying the environmental aspects of its activities, products and services—such as water and energy use, emissions and waste—determining associated environmental impacts and compliance obligations, establishing environmental objectives, and monitoring, evaluating and continually improving environmental performance. Because it follows a management-system approach rather than imposing uniform performance thresholds, ISO 14001 is applicable to organizations of all types and sizes, from manufacturing facilities to service providers.

For exporters, ISO 14001 certification is increasingly requested by international customers as evidence of effective environmental management. It can also provide a strong operational foundation for meeting more advanced ESG reporting requirements, such as GRI- or ESRS-aligned disclosures, because relevant environmental information is identified, monitored and maintained systematically.

 ISO 45001—Occupational Health and Safety Management Systems

ISO 45001 is the international standard for occupational health and safety (OH&S) management systems. Published in 2018, it replaced OHSAS 18001. The standard strongly supports the Social pillar of ESG—an area that organizations may sometimes give less attention than environmental matters.

ISO 45001 requires organizations to proactively identify workplace hazards, assess OH&S risks and opportunities, implement operational controls, and promote an OH&S culture involving both leadership and workers. A key feature of ISO 45001 is its emphasis on proactive prevention and continual improvement, rather than responding only after incidents have occurred.

For labour-intensive sectors such as textiles and garments, construction and processing—where occupational incidents may present significant risks—ISO 45001 can help reduce legal exposure, occupational injuries and ill health, disruption and compensation costs. It is also increasingly incorporated into supplier evaluation criteria used by international brands and business partners, alongside social compliance schemes such as amfori BSCI and SA8000.

Why Start with ISO 14001 and ISO 45001?

These two foundational management system standards are relevant even to organizations that are neither internationally active nor publicly listed. Their implementation costs are generally more manageable than those associated with complex reporting regimes such as the CSRD. More importantly, they can directly improve internal operations—for example, by reducing resource waste and preventing work-related injury and ill health—rather than serving only a disclosure purpose. They therefore represent a practical and accessible starting point for small and medium-sized enterprises beginning their ESG journey.

In addition to these two foundational standards, several other sector-specific standards and certification or assessment schemes are noteworthy:

 SA8000: Social accountability and working conditions.

 BSCI and WRAP: Social compliance assessment programmes commonly used in the textile and garment industry to evaluate working conditions at production facilities.

 ASC and MSC: Certification programmes for responsibly farmed and sustainably caught seafood, respectively.

These standards and schemes are often linked to specific requirements imposed by international customers or brands within particular industries. They may serve as an important market-access credential for participation in global supply chains.

4. Third-Party ESG Ratings

Unlike the three groups above, which generally involve reporting, compliance or certification activities initiated by the organization, ESG ratings are external assessments over which the rated organization may have limited direct control.

 MSCI ESG Ratings and Sustainalytics: International ESG rating providers widely referenced by institutional investors.

 VNSI: The Vietnam Sustainability Index operated by the Ho Chi Minh Stock Exchange (HOSE), which evaluates selected listed companies in the Vietnamese market against sustainability and ESG criteria.

Where Should Businesses Start?

For most Vietnamese businesses—particularly small and medium-sized enterprises that are not yet subject to mandatory requirements—the following sequence may provide a practical approach:

1. Determine whether the organization falls within the scope of any mandatory requirement such as the CSRD, CBAM or applicable Vietnamese regulations. Compliance obligations should take priority because delays may directly affect orders and market access.

2. Consider the GRI Standards as a starting point when the organization needs a comprehensive, accessible and widely recognized framework for reporting its impacts to stakeholders.

3. Add ISSB-aligned disclosures where the organization operates in an emissions-intensive sector or needs to provide sustainability-related financial information to institutional investors and capital providers. TCFD-based concepts remain relevant because they have been incorporated into IFRS S2.

4. Select appropriate management system standards, certifications or sector-specific schemes—such as ISO 14001, ISO 45001, amfori BSCI or ASC—based on customer requirements, operational risks and target export markets, instead of pursuing every available certification simultaneously.

Conclusion

There is no single ESG standard that is appropriate for every organization. Understanding the purpose, intended users and voluntary or mandatory nature of each standard, framework and regulatory requirement enables businesses to avoid spending resources on certifications or disclosures that do not address their actual needs. It also helps them develop a proactive roadmap for meeting increasingly stringent ESG expectations in international markets.

If you would like to learn more about ESG standards or need support in developing a practical ESG implementation roadmap, please contact KMRA for detailed consultation and guidance.