In today’s global landscape, reducing emissions and achieving carbon neutrality have transitioned from aspirational goals to fundamental necessities for businesses worldwide. Driven by robust governmental commitments and evolving international regulations, companies that prioritize sustainable practices are not just contributing to environmental well-being; they are securing their market position and enhancing competitiveness. This article explores the imperative journey towards a net-zero economy, outlining global trends, regulatory impacts, and strategic pathways for businesses to adapt and thrive in this green transition, providing maximum value to the reader.
The Global Imperative for Emission Reduction
The global commitment to environmental stewardship has reached an unprecedented level, with more than 100 nations pledging to significantly reduce greenhouse gas emissions and target net-zero emissions by mid-century. A pivotal moment in this collective journey was the 26th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP26), which solidified international resolve to address global climate change. Major global players, including China, the United States, India, Indonesia, Brazil, Russia, and the European Union, have affirmed their dedication to reducing emissions and achieving carbon neutrality. Notably, 19 out of the G20 member countries, collectively responsible for 75% of worldwide greenhouse gas emissions, have now committed to net-zero goals, marking a substantial increase since COP26.
Mobilizing Finance for Sustainable Futures
Complementing governmental pledges, the financial sector is also actively mobilizing resources for a sustainable future. The Glasgow Financial Alliance for Net Zero (GFANZ) exemplifies this, uniting over 550 member companies across 50 countries. This alliance brings together diverse financial entities, including banks, insurance companies, asset owners, service providers, and investment advisors, all dedicated to achieving net-zero emissions within their portfolios and operations, further driving the global trend towards carbon neutrality.
Overview of RE100’s growth in the period 2016-2021 (Source: RE100 2022 Annual Disclosure Report)
The Global Impact of Carbon Border Adjustment Mechanisms (CBAM)
A significant development shaping international trade is the European Union’s (EU) implementation of the Carbon Border Adjustment Mechanism (CBAM) legislation. This mechanism, crucial for reducing greenhouse gas emissions and fostering carbon neutrality by 2050, impacts major trading partners like Vietnam. The initial phase, from October 1, 2023, to January 1, 2026, requires importers of specific goods (cement, iron and steel, aluminum, fertilizers, electricity, hydrogen gas) from non-EU countries to declare their products’ greenhouse gas emissions without incurring taxes. The second phase, commencing January 1, 2026, will mandate importers to report their carbon footprint, obtain CBAM certifications, and pay carbon taxes to the respective EU government.
The influence of the EU’s CBAM extends globally, with the United Kingdom initiating consultations on its own similar mechanism. Furthermore, the United States introduced the Clean Competition Act in July 2022, which aims to impose carbon border adjustments on energy-intensive imports while simultaneously encouraging domestic carbon reduction within its industries. These parallel developments underscore the growing global trend and the direct impact of carbon border adjustment mechanisms on international trade and businesses.
Consequently, the imperative for businesses reducing emissions and achieving carbon neutrality has solidified into a critical global objective. This presents a new challenge not only for entities already within the global supply chain but also for those aspiring to enter export markets. Without swift implementation of effective emission-reduction measures, companies risk incurring substantial carbon taxes on exports, leading to increased operational costs and diminished competitiveness. The increasing prevalence of green standards means that failing to meet these benchmarks, or to gain a competitive advantage through sustainable practices, could significantly restrict export opportunities across numerous international markets.
The trend of emission reduction and green mechanisms such as CBAM present new challenges for businesses participating in the global supply chain (Image: Internet)
Domestic Corporations: Essential Players in the Net-Zero Transition
The pathway to emission reduction and carbon neutrality is equally vital for domestic businesses, whether they are integrated into the global supply chain or serve local markets. Vietnam has made a firm commitment to reducing greenhouse gas emissions and achieving net-zero emissions by 2050. This national ambition is underpinned by the National Climate Change Strategy for the period up to 2050, adopted on July 26, 2022. This strategy mandates that by 2030, facilities emitting 2,000 tCO2e or more annually must implement significant emission reductions. By 2050, this requirement extends to facilities generating 200 tCO2e or more each year. Additionally, Decree No. 06/2022/N-CP has compelled many manufacturing enterprises to begin reporting greenhouse gas emissions data for inventory purposes this year, with further obligations for emission reductions set for the 2026-2030 period, aligning with Ministry of Natural Resources and Environment targets.
Therefore, businesses must proactively understand, optimize their production processes, and implement effective practical solutions for businesses to shift towards carbon neutrality, complete with a clear roadmap for regulatory compliance. This strategic foresight is crucial for enhancing competitiveness amidst emerging market trends. It is particularly pertinent given the ongoing global supply chain transformations, where Vietnam is increasingly a favored destination for major international corporations. This dynamic environment creates significant opportunities for Vietnamese enterprises to integrate into global supply chains and serve as suppliers for these international entities operating within the country.
The development of a green economy and the transition to green manufacturing are foundational for individual businesses, the entire global supply chain, and the broader national economy. When a supplier unit successfully reduces emissions and achieves carbon neutrality, it propels all businesses within its operational chain closer to achieving overall net-zero emissions. This emphasizes that a widespread commitment to emission reduction efforts and collaborative initiatives towards carbon neutrality significantly accelerates the realization of the Net Zero objective across an interconnected network of enterprises.
Forging a Carbon-Neutral Economy: Local Initiatives and Expert Support
Across Vietnam, numerous localities are actively setting ambitious emission reduction and low-carbon economy goals, contributing to the nation’s overarching objective of reducing greenhouse gas emissions and achieving net-zero by 2050. Ho Chi Minh City, for instance, through its Climate Change Action Plan for 2021-2030 with a vision to 2050, aims for a 10% emission reduction by 2030. With international support, the city endeavors to reach a 30% reduction, transitioning towards a sustainable economy with lower carbon footprint.
Leveraging over 14 years of expertise in the renewable energy sector, dating back to 2009, Vu Phong Energy Group is a key partner in Ho Chi Minh City’s pursuit of internal carbon neutrality. Drawing on extensive experience in developing and operating practical solar energy systems, especially rooftop solar installations for businesses, Vu Phong provides crucial support in calculating potential emission reduction benefits. Furthermore, the group is actively advising on the establishment of an internal carbon credit market, contributing to comprehensive carbon reduction solutions for the city.
A greenhouse gas inventory report from Ho Chi Minh City’s Department of Natural Resources and Environment highlights that stationary energy and transportation collectively contribute 93.6% of the city’s total emissions. This makes these two sectors paramount in the strategy for lowering overall greenhouse gas emissions. Additionally, effective plastic waste management plays a role in further reducing emissions and enhancing the city’s environmental efforts. As a densely populated urban center with robust manufacturing and business activities, Ho Chi Minh City exhibits substantial energy consumption, approximately 25 billion kWh annually, representing nearly 10% of the national total. Therefore, strategic initiatives to reduce emissions in the stationary energy and transportation sectors remain the city’s top priority.
In an era of increasing international integration and competitive pressures, Vietnam, as a developing nation, must strategically engage with global trends such as the circular economy, green economy, and the overarching goal of greenhouse gas reduction. Acknowledging existing financial constraints and a later start, the country can prioritize tackling major emission sources first, learning from experiences, and progressively scaling up efforts. Ultimately, reducing greenhouse gas emissions and aspiring for carbon neutrality is a universal movement. Proactive adaptation is indispensable for businesses to sustain and elevate their standing within this evolving landscape, with collaborative efforts among enterprises proving even more effective in achieving widespread sustainable development.
Phong, Pham Nam
Founder, Chairman of the Board of Directors, Vu Phong Energy Group
(Source: Forbes Vietnam Magazine No. 119)
Detailed Vietnamese analysis on carbon neutrality
Translated and images added by Vu Phong Energy Group
