• Global businesses are increasingly prioritising ESG standards in their decision-making, with the industrial sector shifting towards sustainable practices for long-term growth.
• In Viet Nam, green industrial development is a crucial strategy for attracting foreign investors and supporting a sustainable future.

Green industry is becoming a global trend

Global enterprises are increasingly concerned with ESG (Environmental, Social, and Governance) because these factors not only reflect a commitment to social responsibility but also directly impact the sustainable development of the business. Firstly, adopting ESG standards helps companies to build a positive image, enhance their reputation, and attract investors interested in sustainable development.

Increasingly stringent environmental protection and social responsibility regulations compel businesses to comply to avoid legal risks and penalties. For example, in the Corporate Sustainability Reporting Directive (CSRD), the European Union has required approximately 50,000 companies operating in this market to disclose detailed sustainability measures.

Furthermore, according to Thomas Rooney, Senior Manager of Industrial Real Estate at Savills Hanoi: "Modern consumers tend to support brands that are responsible towards the environment and the community, thereby creating a competitive advantage for businesses that meet ESG requirements. ESG also helps companies manage risks better and minimise the negative impacts of climate change, environmental incidents, and social instability, ensuring long-term stability and growth."

In line with the global ESG "wave", industrial sector businesses focus on sustainable development factors. Green industry, aimed at reducing negative impacts on the environment and natural resources, is receiving increasing attention. These industrial parks are designed to help businesses minimise environmental impacts by optimising production processes, using renewable energy, and implementing advanced technology.

Thomas clarifies: "Developing a ‘green’ industrial park means engaging in cleaner production activities, minimising negative environmental impacts, and aiming to achieve zero carbon emissions."

The World Bank Group has previously initiated a project in collaboration with the Turkish Ministry of Science, Industry, and Technology to transform traditional Organised Industrial Zones (OIZs) into Ecological Industrial Parks (EIPs) by developing a national EIP framework. The project has worked with the Izmir Ataturk Industrial Park to explore technical opportunities for the transition. This project aims to enhance the industrial park's competitiveness by reducing operational costs through water and energy efficiency improvements. For example, implementing a continuous washing system with counter-current water/fabric flow after dyeing and printing processes can save 16,100 m³ of water and 644,000 kWh of electricity annually.

Thomas emphasises that, as the green industry gains increasing attention, green industrial certifications such as LEED, EDGE, Green Mark, with their clear criteria, will provide businesses with more precise direction in the transition process. These certifications assess industrial parks based on various criteria, including energy efficiency, water conservation, and waste and emissions reduction.

Viet Nam is not left out of the trend

With increasing FDI, foreign enterprises will demand large production spaces and warehouses to support their operations. Therefore, industrial real estate is still predicted to be a bright spot to attract Vietnamese investors. According to a KPMG survey involving 200 FDI companies, besides factors such as location, labour supply, and logistics infrastructure, industrial parks meeting green criteria are becoming one of the top priorities for FDI companies when choosing investment locations in Viet Nam.

The Vietnamese government aims to become a developed country by 2045 and achieve net-zero emissions by 2050. Green industrial zones in Viet Nam have an advantage over traditional industrial zones due to prioritised support in technology, exports, branding, value chain, and preferential loans under Decree 35/2022/ND-CP.

According to data from the Ministry of Planning and Investment, by 2030, about 40-50% of provinces and cities nationwide will plan to convert existing industrial zones into eco-industrial zones, and 8-10% will aim to build new ones.

The VSIP and DEEP C industrial zones are leading the trend in Viet Nam. These zones are at the forefront of integrating rooftop solar power systems, which supply electricity to various sections of the industrial areas.

Based on primary data from working with clients, Thomas shared: "About 80-85% of foreign-invested enterprises require ESG standards when choosing a factory location, prioritising sustainability. We need to meet this demand to compete effectively with neighbouring markets such as Thailand, the Philippines, and Indonesia, where green industrial zones have been developed. This will help enhance attractiveness to foreign investors and improve our position in the global market."

Currently, four out of over 400 industrial zones in Viet Nam are eco-industrial zones. With a limited number of green industrial zones and high demand, this trend is still in its early stages, and the development of green industrial zones is a long-term story.

Thomas explained: "Many industrial zones have been developed for a long time according to the traditional model. Converting a conventional industrial zone into an environmentally friendly industrial zone is not simple due to high costs and the need for careful consideration of the legal framework by the government. The cost of building green industrial zones is usually about 30% higher than traditional industrial zones. More incentives and credit support for investors are needed to reduce the initial cost burden."