What Do CBAM and ESG Mean for Vietnamese Businesses?
ESG covers a broad range of environmental, social and governance issues. Within the E – Environmental pillar, however, one issue is becoming particularly tangible for Vietnamese businesses: carbon emissions.
This is where ESG meets CBAM.
Where do CBAM and ESG intersect?
Within an ESG framework, businesses consider how they use energy and resources, manage their environmental impact and reduce emissions across their operations.
The EU’s Carbon Border Adjustment Mechanism, or CBAM, focuses on a more specific issue: the emissions embedded in selected goods imported into the European Union.
To meet CBAM requirements, importers need to determine how much carbon was emitted during production. The necessary data must therefore begin with the factory, the raw materials, the energy used and other relevant stages of the supply chain.
ESG provides the broader management framework. CBAM brings part of that framework directly into commercial activity.
Why does CBAM make the environmental pillar of ESG more tangible?
In the past, many businesses approached ESG primarily through sustainability reports, environmental targets and long-term emissions commitments.
CBAM raises questions that are much closer to day-to-day operations:
How much carbon is embedded in the product?
Where does the data come from, and can it be traced?
Which stages of production generate the most emissions?
Where could emissions be reduced?
How might carbon affect costs and competitiveness?
These questions cannot be answered through commitments or polished reports alone. They require credible data and coordination across production, engineering, procurement, finance, export and sustainability teams.
What does CBAM mean for Vietnamese businesses?
The main legal obligations under CBAM fall on EU importers. However, those importers rely on manufacturers and other businesses in the supply chain to calculate the emissions embedded in imported goods.
Vietnamese companies may therefore be asked to provide information on raw materials, electricity and fuel consumption, production volumes, manufacturing processes and other relevant sources of emissions.
This is not limited to businesses exporting directly to the EU. A company supplying raw materials, components or intermediate goods to another exporter may also receive requests for emissions data.
The ability to measure, manage and provide this information is therefore no longer relevant only to ESG reporting. It may also influence a company’s ability to meet customer requirements and retain its place within an international supply chain.
From ESG to CBAM: A connected data journey
The relationship between ESG and CBAM can be understood as a connected flow:
Environmental management within ESG → Emissions data → Embedded product emissions → CBAM requirements → Cost and competitiveness
The environmental pillar of ESG gives businesses a structure for managing their impact.
From this foundation, a company can collect and monitor emissions data more systematically. That data can then be used to calculate the carbon embedded in its products and provide the information required by customers or importers under CBAM.
Once emissions are connected to individual products, carbon becomes more closely linked to cost, pricing and supplier-selection decisions.
How is CBAM bringing ESG closer to cost and market access?
CBAM does not make ESG purely a compliance exercise. It does, however, demonstrate how an environmental issue can quickly become a commercial one.
A business with clear and well-managed data is better placed to respond when a customer requests information. It can also identify carbon-intensive processes, explore opportunities to improve energy efficiency and develop a realistic emissions-reduction plan.
By contrast, when data is fragmented, inconsistent or difficult to verify, a business may need considerably more time to respond and could be placed at a disadvantage when customers compare suppliers.
The value of ESG therefore lies not only in what a company reports, but also in how well it understands and manages its own operations.
How should businesses prepare for CBAM?
Businesses can begin with several practical steps:
Identify whether their products or position within the supply chain may be connected to the EU market.
Review existing requirements from customers and importers.
Determine what data is available on materials, energy, fuel and production volumes.
Establish where that information is held and which teams are responsible for it.
Identify the most carbon-intensive stages of production.
Appoint a clear coordinator for CBAM-related requests.
Not every business needs to launch a large-scale project immediately. The first priority is to understand the level of exposure, identify what information is already available and determine what is still missing.
CBAM is not the whole of ESG, but it is an important intersection
ESG extends well beyond carbon, and CBAM does not represent the full scope of a company’s sustainability agenda. Nevertheless, the connection between the two is becoming increasingly clear.
Strong environmental management gives businesses the data and internal capabilities needed to respond to CBAM-related requests. At the same time, CBAM is bringing emissions measurement and reduction much closer to everyday business decisions.
For Vietnamese companies, understanding product emissions and preparing credible carbon data is not only about producing an ESG report.
It is increasingly becoming part of what it takes to compete in international markets.
Follow Star Consulting for further insights into CBAM, ESG, emissions management and the changes shaping businesses across international supply chains.
📩 Contact us for expert advice: info@starconsulting.com.vn
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