THE EARLY STAGE OF APPLYING ENVIRONMENTAL, SOCIAL, AND GOVERNANCE IN AN ASIAN EMERGING ECONOMY

Purpose: This article aims to clarify the current situation and the factors influencing the early stages of applying environmental, social, and governance (ESG) in the Vietnamese economy. Design/methodology/approach: We employed a large-scale survey with 130 responses from November 2023 to January 2024 and statistics analysis using SPSS 26.0. Findings: We found that awareness of leaders, accountants' levels, pressure on ESG, state guidance, management process, information base, and women on boards, respectively, influence the early stages of applying environmental, social, and governance in Vietnamese enterprises. Research, Practical & Social Implications: This study illuminates the factors that influence the early stages of ESG performance in Vietnam, an emerging Asian economy. The findings highlight the crucial role of leaders' awareness and accountants’ levels in this process. This understanding can guide the country's leaders and policymakers in formulating strategies to promote ESG adoption for the sustainable development of the whole economy. Originality/value: This study stands out for its originality. It comprehensively analyzes the early period of ESG adoption in an emerging Asian country, particularly Vietnam. Its findings offer objective evidence to understand the situation and impacted factors on ESG application, aiding governments and related parties in formulating appropriate policies for sustainable development with ESG.


INTRODUCTION
Nowadays, sustainable development is the paramount aim of all economies.
Environmental, social, and governance (ESG), a global trend, is driven by the increasing significance of environmental, social, and governance considerations for sustainable development and the long-term success of enterprises (KPMG, 2022).ESG reporting, a vital aspect of this trend, involves companies' public disclosure of non-financial information to stakeholders and investors.These disclosures primarily cover three aspects: environmental, social, and governance, promote transparency, ethical business practices, green investments, and ultimately, sustainable development (Neha et al., 2022).
ESG issues are one of the most important bases for sustainable development.This Government has released various regulations on ESG until now (Ministry of Finance, 2020; Nguyen et al., 2023).However, there is still a lack of in-depth research on the actual application of ESG at the early stage in emerging economies like Vietnam.Therefore, this article explores the factors that impact the early stages of applying ESG in Vietnam to provide insight into ESG activities in emerging Asian economies.The main contribution of this study is to promote the performance of ESG not only in the Vietnamese economy but also in other emerging economies worldwide.

THEORETICAL FRAMEWORK
Sustainability is a broader principle promoting responsible business conduct by applying ESG activities.The main difference between sustainability and ESG is in scope.
Sustainability is a broader principle encompassing various responsible business practices, from supply chain management to stakeholder engagement and community development.ESG is a 4 specific tool measuring company performance in areas like carbon emissions, water treatment, diversity, worker conditions, and board management to help businesses achieve not only sustainability but also financial performance targets (Bahadori et al., 2021;Lee et al., 2016;Deng & Cheng, 2019;Finogenova & Larkova, 2024).
The term ESG originated from the 2004 United Nations report "Who Cares Wins," which gained initial support from 20 financial institutions in response to a United Nations call on sustainable development.First, ESG found its roots in the finance sector.ESG focuses on how companies and investors incorporate environmental, social, and governance considerations into their business models to make decisions for sustainable development.ESG encompasses three key elements, namely environment, social, and governance, providing a crucial metric for evaluating the sustainability and ethical impact of investments in companies or businesses (Sustainable Banking and Finance Network, 2021;Basuony et al., 2023).In addition, Friede et al. (2015) found that the positive ESG impact on corporate financial performance appeared stable over time by reviewing more than 2.000 empirical studies.According to Tähtinen (2018), EY Fifth Global Institutional Investor Survey 2020, andNguyen et al. (2023), ESG components include comprehensive environmental, social, and governance criteria.Generally, the Environmental aspect includes climate change risks and opportunities, renewable energy and clean technologies, waste and pollution management, environmental permits/violations, biodiversity, natural resource management, etc.The Social aspect includes customer health and safety, labor practices and working conditions, labor health and safety, community impacts and grievances, stakeholder engagement, gender diversity, etc.The Governance aspect includes sustainability strategy and management, corporate structure, management compensation, disclosures and transparency, business ethical behaviors, etc. (Aich et al., 2021;Torres et al., 2023).Based on the previous studies on ESG, we propose the following hypothesis:

AWARENESS OF LEADERS (AW)
According to Nguyen et al. (2023), Leadership's dedication to implementing ESG principles is one of the most critical factors in successfully adopting the two companies' case studies.The leadership team's determination and mission to create a sustainable ecological urban area are pivotal drivers for ESG advancement in the Vietnamese industrial zone company.Also, Helfaya et al. (2023) suggest that board CSR strategy has positively and significantly affected the overall disclosure of ESG practices in Europe.Their study is based on a European sample of 21 countries and 784 companies.The executives with higher levels of CSR strategy and GRI sustainability reporting framework tend to use governance mechanisms that help firms disclose high-quality information on ESG.Thus, we hypothesize that: H1: Awareness of leaders positively affects the application of ESG.

Women on Boards (WB)
Board gender diversity and ESG disclosure have a positive relationship.Arayssi et al. (2016) identified the relationship between women's board participation and firms' good ethical performance.An increase in the number of women on boards enhanced the level and efficiency of ESG disclosure and firm performance.Firms with a more significant number of women board members appear to be more charitable and philanthropic and support a more substantial number of environmental initiatives.In addition, women are usually known for their nurturing nature and are more passionate about social causes (Arayssi et al., 2016;Bear et al., 2020).
Notably, having women on the board represents a socially responsible organization aware of gender inclusivity issues.When the proportion of female directors increases, corporate ESG levels also significantly increase (Peng & Chandarasupsang, 2023).Therefore, we hypothesize that: H2: Women on boards positively affect the application of ESG.

STATE GUIDANCE (SG)
Companies that follow the official ESG guidelines intend to disclose more sustainable information than those that do not follow.Darnall et al. (2022) found that firms that follow ESG guidelines disclose 39% more sustainability information than those that publish sustainability reports but do not follow ESG reporting guidelines in Japan.ESG reporting guidelines have emerged as institutional rules to address these concerns by shaping what content and procedures are legitimate for sustainability information disclosure.These guidelines provide a clear framework that firms use to disclose their sustainability information publicly (Romito & Vurro, 2020).State management agencies and professional associations have had specific instructions on implementing environmental standards and ESG in business operations.
Therefore, we hypothesize that: H3: State guidance positively affects the application of ESG.

PRESSURE ON ESG (PR)
According to Buniamin and Ahmad (2018), the greater the media legitimacy perceived by managers, the greater the companies practice ESG reporting.Media pressure is an opportunity for companies to legitimate their ESG activities.The public media can influence public attention to various issues (Blanc et al., 2017), including the performance of enterprises in terms of ESG.When managers perceive ESG information as necessary and needing public media attention, they report their ESG activities to society.Also, stakeholders pressure corporations to report on environmental and social information (Islam & Deegan, 2008), especially powerful stakeholders' pressure.Also, according to Qian et al. (2020), the normative requirements put more intense pressure on sustainability reporting among Indo-Pacific companies than on the belief in "doing good" business cases.Therefore, we hypothesize that: H4: Pressure on ESG positively affects the application of ESG.

INFORMATION BASE (IB)
Information systems are critical to embedding ESG strategy into daily business operations and making strategic decisions.Information architecture driven by its ESG strategy is the backbone of an organization in facilitating measurement, management, and visualization of strategic and operational processes for sustainable development (Delloite, 2019).New information technology systems, which include innovations such as edge computing, can make ESG more effective and efficient (Su et al., 2023).In addition, Nguyen et al. (2023) found that a transparent information system and well-defined processes enhance the company's capabilities.Therefore, we hypothesize that: H5: Information base positively affects the application of ESG.

MANAGEMENT PROCESS (MP)
Suppose the company management process has clearly and thoroughly defined and implemented the ESG management process, such as environmental quality/social responsibility, and data management standards.In that case, it will be able to implement ESG reporting successfully.Niu et al. (2022) found that the ESG management process can actively improve organizational sustainability and reporting.Also, the transparent and modern 7 management process would motivate the success of ESG performance (Nguyen et al.,2023).
Therefore, we hypothesize that: H6: The management process positively influences the application of ESG.

Accountants' levels (AL)
Professional accountants play a significant role in ensuring social responsibility practices and enterprises' sustainable development strategies.Ramadhan et al. (2023) found that accountants play an important role in ensuring businesses and projects run more environmentally friendly and sustainable, following ESG principles reflected in the company's financial reporting.Nguyen et al. (2019) found that accountants' qualifications positively enhance modern management accounting practices adoption in Vietnamese enterprises.
Therefore, we hypothesize that: H7: Accountants' levels positively influence the application of ESG.The research sample size depends on the research method and required reliability (Nguyen Dinh Tho, 2011).In exploratory factor analysis (EFA), sample size is often determined based on two factors: minimum size and number of observed variables included in the analysis.
For exploratory factor analysis (EFA) and multivariate regression, the minimum sample size is calculated using the formula 50+8*m (m is the number of independent variables) (Hair et al., 1998).This study proposed seven independent variables, so the minimum sample size is 50 + 8 * 6 = 98 observations.However, to ensure the scale of the survey on many different businesses and the sample size that can be generalized to the whole population, we collected 130 questionnaires by Google link sent to companies.We used SPSS 26.0 and AMOS software to analyze the data.

RESULTS
Table 1 provides detailed information on the characteristics of the sample.In 130 observations, 27 companies (20.77%) were listed on the Vietnamese stock markets, while 103 companies (79.23%) were unlisted.These companies mainly operate in the service sector, accounting for 60 companies (46.15%); the manufacturing and trading sectors are almost equal, accounting for 15.38% and 16.92%, respectively, and the remaining 21.54% are multi-industry companies.Regarding the criteria of total assets, half of the sample are companies with over 100 billion VND, accounting for 53.08%.There are 10 respondents from the Board of Management (7.69%), 28 respondents from the Board of Directors (21.54%),48 respondents from the Head of Departments (36.92%), and 44 respondents (33.85%) from staff positions.
Regarding ESG performance, companies operating all three aspects account for the highest proportion, 48.46%; companies operating the social aspect account for 25.38%; companies operating the governance aspect account for 12.31%; and the lowest rate are companies operating the environmental aspect (accounting for 7.69%) and companies operating few ESG related items, accounting for 6.15%.

Exploratory Factor Analysis (EFA)
The EFA is crucial for establishing the construct validity of the measures and ensuring that the items effectively capture the intended theoretical concepts under investigation.The results of the first EFA analysis for the independent variables showed that seven factors were extracted at Eigenvalues = 1.208 (greater than 1), KMO was 0.926 (>0.6), and Bartlett's Sig.= 000.The total variance extracted from 7 factors explains 65.276% of the variation in the data.The factor loading weights of the observed variables are all greater than 0.5, so the observed variables are retained for confirmatory factor analysis Confirmatory Factor Analysis (CFA).

Regression model
Linear regression analysis is performed with seven independent variables: AW, PR, WB, SG, IT, MP, AL, and the dependent variable is ESG performance (Table 4).

Table 4
Coefficients a Source: Compilations by the authors The regression equation with the standardized beta coefficient is: The regression result shows an adjusted R 2 value of 0.639 with a significance of 63.9% (Table 5).The Sig. of the seven factors is all less than 0.05 (=0.000), meaning that the factors included in the model are appropriate and statistically significant at the 5% significance level.
compelling motivation drives Vietnamese companies to apply ESG activities and release ESG reports.According to PWC (2022), approximately 70% of 234 surveyed Vietnamese enterprises have not or rarely disclosed ESG reports, which is quite a low rate.At the 26th United Nations Climate Change Conference of the Parties (COP26) in November 2021, Vietnam committed to reaching a Net Zero target by 2050 and phasing out coal-fired power by 2040.The Vietnamese The Early Stage of Applying Environmental, Social, and Governance in an Asian Emerging Economy ___________________________________________________________________________ Rev. Gest.Soc.Ambient.| Miami | v.18.n.8 | p.1-20 | e07123 | 2024.

Figure 1
Figure 1Research model 20 IB3. Software related to corporate governance is updated regularly IB4.Implementing automation processes in its production and business activities.IB5.Having a cybersecurity system to ensure the implementation of ESG MP-Management process Niu et al. (2022) MP1.Clearly defined and implemented its ESG process MP2.Built a set of environmental quality and data management standards MP3.Built a set of standards for social responsibility MP4.Updated corporate governance regulations periodically MP5.Regular meetings to evaluate ESG performance et al. (2023) AL1.The chief accountant has been trained in ESG AL2.Accountants are updated with knowledge of ESG AL3.The knowledge and skills of the chief accountant are sufficient for ESG implementation AL4.Chief accountants/accountants hold international professional certificates to support ESG ESG-ESG performance Nguyen et al. (2023) ESGR1.The company has performed ESG in the three years ESGR2.The company is performing ESG activities this year ESGR3.The company will perform ESG within the next three years The Early Stage of Applying Environmental, Social, and Governance in an Asian Emerging Economy ___________________________________________________________________________ Rev. Gest.Soc.Ambient.| Miami | v.18.n.8 | p.1-20 | e07123 | 2024.

Table 1
Description of the sample ___________________________________________________________________________ Rev. Gest.Soc.Ambient.|Miami|v.18.n.8 | p.1-20 | e07123 | 2024.10 coefficient method before exploratory factor analysis (EFA) to eliminate inappropriate observations.Table2presents the Cronbach's Alpha coefficients for each variable within the model, evaluating their internal consistency.With a threshold of 0.6 or higher indicating reliability, the findings reveal that all variables in the model surpass this benchmark.Cronbach's alpha for each of the eight-factor groups, group AW, PR, WB, SG, IB, MP, AL,

Table 3
KMO and Bartlett's Test Source: Compilations by the authors The variable ESG is explained by seven independent variables: AW, PR, WB, SG, IB, MP, and AL.The model does not have autocorrelation and multicollinearity phenomena.

Table 6
General explanations of variables and sources of referenceWomen on Boards pay more attention to ESG than men WB2.Women on Boards are more sensitive to environmental issues WB3.Women on Boards are more sensitive to social issues WB4.Women on Boards contribute to more effective corporate governance WB 5. Women on Boards enhances the level of ESG application Professional associations have specific guidelines for implementing ESG.SG5.Local authorities have policies to promote the ESG application SG6.State agencies have issued documents sanctioning environmental violations.Having an information system to process ESG data IB2.Having software available to support ESG performance The Early Stage of Applying Environmental, Social, and Governance in an Asian Emerging Economy ___________________________________________________________________________ Rev. Gest.Soc.Ambient.| Miami | v.18.n.8 | p.1-20 | e07123 | 2024.