The Corporate Sustainability Reporting Directive (CSRD) is a directive from the European Union with more specific and stringent requirements than the previous Non-Financial Reporting Directive (NFRD). This directive mandates that large, medium, and small listed companies related to the EU market must report the environmental and social impacts of their business activities in a transparent and detailed manner. Unlike existing standards, sustainability reporting under CSRD is compulsory rather than voluntary.
Currently, Vietnamese businesses operating in the European market are not directly impacted by the CSRD since they have not yet met the required net revenues threshold (150 millions euro in the last 2 fiscal years). However, this directive still indirectly affects partners, customers, and suppliers outside the EU who are connected to European companies.
Given the increasingly deep economic cooperation between Vietnam and the European Union and Vietnam’s active participation in the global supply chain, domestic companies that comply with CSRD reporting will be viewed more favorably by EU and international partners. This is also an opportunity for Vietnamese businesses to consider transforming their business models towards greater sustainability, enhancing their competitiveness in the global market.
The CSRD is expected to indirectly impact two main groups of businesses in Vietnam: foreign direct investment (FDI) companies and companies within the value chains of European businesses.
FDI companies in Vietnam
Typically, FDI companies from Europe or with parent companies in Europe will be required to report under the CSRD. With sustainability strategies that are specifically guided and aligned with their parent companies, these businesses will not need to invest too much effort and resources in preparing the annual CSRD reports. In terms of reporting timelines, FDI companies in Vietnam should clarify details with their parent companies, but generally, reporting will begin in 2025 (for the 2024 financial year) if the parent companies are large corporations. FDI companies are usually required to report on three key areas:
Vietnamese companies and manufacturers in the value chains of European businesses
Unlike FDI companies, these businesses do not follow direct instructions from parent companies. This means they lack standardized sustainability reporting processes and need to proactively coordinate with their European partners to ensure timely and compliant reporting. Although the reporting obligations are not as stringent as for FDI companies, adhering to the CSRD will help these businesses minimize disruptions when operating in the European market. Three major topics typically required for reporting include:
It is evident that some of the reporting topics under CSRD present significant challenges for Vietnamese companies, particularly due to the lack of specific guidelines. KLINOVA is committed to supporting businesses in preparing sustainability reports in accordance with CSRD, providing opportunities for deeper integration into the global supply chain.
