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EU Green Deal and Vietnam's export: Opportunities for Vietnam’s export in the long run

21/12/2023    4

European Green Deal is posing great challenges to Vietnamese manufacturers and exporters of green transition, especially in the coming time.   

However, given the broader vision in the long-term plan, businesses who proactively take synchronous and comprehensive green transition may also access many new considerable opportunities. Specifically:

- Opportunities for expanding the market share in the EU

So far, the EU is always known to be a market where clients are comfortable to pay at a high level but are also aware of environmental protection and climate change. Even in comparison with the EU’s green policy trends, green consumption awareness of some groups of EU consumers is better and more aggressive.

Currently, along with strong green movements in the EU, its green customer set is bigger and bigger, which then will generate potential market “demand” for green products, especially in the consuming sector. Meanwhile, the supply sources of green products are still very limited in the context that foreign goods imported are just trying to meet minimum legislative standards. As such, if businesses proactively transform their normal exported products (which have already saturated in the traditional market) to green products, they will be able to access the EU’s potential green market.

- Opportunities for access to developed markets with EU-equivalent standards.

The EU is the most pioneer and aggressive area in enforcement of green economy globally. However, EU is not the only one area to strive for a sustainable and green economy. In many Vietnam’s key export markets, especially developed ones that Vietnam has been having high potential of export such as United States, Canada, United Kingdom, Japan, Australia, New Zealand, etc., issues relating to green transition are more and more prioritized in development strategies, economic-investment cooperation of leaders and authorities. 

In the future, it is more likely that Vietnam’s important and potential export markets will have the same sustainable and green policies as those of the EU although they may be a little bit different in methods and details but in general still towards the same direction. Even in some markets, EU-equivalent measures (CBAM, EUDR, etc.) have been inclusive in the draft and/or official agendas for approval and entering into force in very near future.

Stimultaneously, same as in the EU, in many developed markets, customers are having more thorough awareness and strong actions through their smart consuming choices with the aim for environmental protection and sustainable development.

Thus, that businesses have the estimation, preparation and step-by-step actions for their green transition in production, sales and investment process may be also their “one fit two” opportunity in two aspects:

- First, the capacity for meeting green standards at export markets: Enforcement of EU green standards not only enables businesses’ goods and services to meet regulations for EU market access but also is the ground for them to be confident that their products will achieve other many important market’s current/future green standards. In certain circumstances, once granted a “certificate” for meeting EU green standards, businesses’ goods shall be easily accepted or pass the control in the same aspects in many other developed markets;  

- Second, the accessibility of green customer set in markets: Green transition may also help businesses to access green product markets in many countries; which then creates opportunities to access increasingly expanding green customer set in these markets. This is very important in the context that the competitiveness in the traditional market is getting fiercer, and the market scale is getting narrower with the viral spread of the awareness of green and sustainable consumption.  

- Opportunities of reducing cost, improving production and sales efficiency

Shifting from traditional production, business models towards green and sustainable ones will definitely require certain costs (setting up production model, technology, new ways of working, etc.). And for many businesses, this is a considerable investment.

However, in the long run, this transition may help to save business and production cost of companies, especially in below aspects:

- Reducing energy cost (through clean self-consumption energy mechanism; production models which are arranged appropriately to save and avoid wasting energy; clean energy-efficient production technology/use of natural energy source with cheaper cost, etc.);

- Reducing chain management cost (through production system enabling automatic continuous control at each stage in the chain; mechanism for input control allowing exemption at source of all risks to the chain and final products, etc.)

- Maximizing business efficiency (through modern green technologies allowing maximization of energy use, limiting the waste of materials, instruments, water; human resource, etc.).

- Opportunities for accelerating green economy in Vietnam

As the economy of deep integration, as well as thorough understanding of the consequences of global climate change, Vietnam is proactively engaging in actions toward green transition, building clean, green and sustainable economy. Specifically: 

- From the Governance perspectives, many  policy frameworks, legislations towards green, sustainable and resource-efficient transition, etc. have been built, adopted and/or implemented, many of which are close to the green policies of the EU and countries (for example: environmental tax, forest environmental service fees, rules on manufacturer responsibility, Timber Legality Assurance (VNTLAS) system, developing carbon credit market in Vietnam, etc.);

- From a consumption perspective, several Vietnamese consumers have an awareness of environmental protection and are proactively making their efforts to spread the message of environment in consumption behaviors.

In that context, implementing green transition in businesses is not only the task to meet requirements of exporting market but are also the requirements for companies to:

- Ensure legal business and production activities in the domestic legislation framework;

- Access to domestic green customer set (if business has the strategy to develop high potential domestic market).

Besides, for businesses in traditional green sectors (especially in forestry, afforestation, etc.), related policies (i.e. developing carbon credit market) is the opportunity for them to have considerable income, which then help businesses to reinvest, boost the production, increase profit margin. Exporting businesses are the subject of related measures (i.e. CBAM) in which instead of purchasing costly green certificates from the EU or other markets, they can buy them in Vietnam at more affordable prices. Then, not only companies’ profits can be better preserved but businesses also indirectly contribute to the domestic green, sustainable development.

Source: Report "EU Green Deal and Vietnam's Exports - The case of the agricultural, food and textile industries" – Center for WTO and International Trade

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