Sustainable development: The intimate connection between the economy and enterprises

By Pham Phu Ngoc Trai - Aug 09, 2017 | 02:56 PM GMT+7

TheLEADERThere have been numerous examples of companies that suffer from sluggish growth or fall into crises due to the failure of sustainable development on legal, social and environmental aspects.

Sustainable development: The intimate connection between the economy and enterprises
Pham Phu Ngoc Trai, Chairman & CEO of Global Integration Business Consultants (GIBC) (Photo:

According to the Ministry of Planning and Investment, 43,350 enterprises have been forced to shut down in the first six months of 2017. Meanwhile, about 61,300 enterprises have been newly established and nearly 15,380 enterprises have come back into operation since January 2017.

Regarding start-up enterprises, according to the raw statistics, the number of successful projects in Vietnam is limited compared to the number of in-progress ones. Only about 10% of start-up enterprises exist in the early stages, 30% fail, and 60% are struggling to make ends meet.

The failure shows that sustainable development in business is a huge challenge. Given this situation, is the target of establishing one million businesses by 2020 attainable?

The intimate connection between business quality and business environment remains to be a major challenge to the sustainable growth of the economy and enterprises.

An example in the livestock sector of Vietnam

The policies, as well as the petty and fragmented model in animal protein production, have decreased the efficiency of animal husbandry in Vietnam. Livestock farmers in Vietnam need an average of 3.5-4kg of feed to produce 1kg of pork compared to 2.5 kg in the US.

As a result, Vietnamese consumers have to pay one and half or twice the price for meat products compared to the US while their average income is only about 10% of Americans.

This is the consequences of the small-scale funding mechanism and the fragile relationship between research institutes, institutions and private enterprises. Moreover, the farmers still fail to look at the big picture, which causes great constraints on agricultural development.

Changes take time, but it is high time that agricultural enterprises broke out of conservative ideals. It is necessary to apply advanced models to improve the productivity and quality of the products and increase the income for farmers.

It is also necessary to expand and restructure the hi-tech production chain to improve economic efficiency. Therefore, Vietnamese people can benefit from not only lower prices but also products of higher quality.

Sustainable development: Create values in business to generate profit

On the other hand, not only in Vietnam, the world always has to confront with social, environmental and economic challenges in its development process. We should always balance between short- and long-term benefits.

As a part of the society and the environment, enterprises also need to take on their responsibility as governments and non-governmental organizations in the world lack the capacity to tackle all the difficulties in the development process.

According to Professor Michael E. Porter (Harvard Business School), in addition to the role of generating profits, there has been a great shift in the approach to the role of business in society. From charitable acts (donation, volunteering,…) to corporate social responsibility (CSR – to comply with regulations and moral codes), now the latest approach is Creating Shared Value (CSV). CSV means including social issues and challenges in the process of creating the economic value of the business.

According to Harvard professors Porter and Kramer, there are three levels of CSV:

- To meet social demands via products, to reach customers who have not been served or have not been served well;

- To redefine "efficiency" in the value chain by using resources, suppliers, logistics and staff more effectively;

- To better the local business environment by improving the skills and the legal environment along with supporting the organizations.

CSV pioneers a new approach to creating values in sustainable business

To do this, there should be strong State support for the business environment. The resources should also be reasonably distributed based on values created by each economic sector.

Currently, we are promoting the national start-up spirit, which aims at not only the quantity but also the quality of enterprises. Therefore, we should also support a favourable business environment for the sustainable development of enterprises.

There is no stronger resource in starting a business than the joint effort of State and the community which links to the national spirit. “Alone go fast, together go far", emphasized Prime Minister Nguyen Xuan Phuc at a recent start-up event.

Young people usually choose something easy to start a business. However, “if you are a follower, you will be carefree, but sometimes you will feel that things are not in your control and you are so insignificant.”

Therefore, there should be a joint effort of relevant parties to encourage ambitious entrepreneurs. This is also a way to devise a business strategy based on the concept of CSV – “creating shared values”.

It is about time that we aimed at the greatness originating from the current values. “Greatness” is not only the outstanding goals of sales, market share, profit,... but also the reputation of the company when we help create the values for the society.

In fact, the journey to promote sustainability itself will stimulate creativity and breakthroughs that spark outstanding values. In the long run, businesses should not stop at popularity; they should aim at admiration!