How Do Businesses Mitigate Risks Through ESG Standards?

ESG in business and risk management are inseparable concepts. When implemented genuinely, ESG enables companies to proactively prevent, minimize, and control risks at the root, rather than reacting passively when incidents occur.

Let’s explore with IBS how ESG in business and risk management is supporting enterprises to stand firm and grow sustainably in the modern era.

What is ESG in Business?

ESG stands for Environmental, Social, and Governance – a set of standards used to evaluate non-financial factors in a company’s operations and development. Specifically:
  • E – Environmental: Evaluates the company’s impact on the environment, including emissions control, waste management, resource usage, renewable energy adoption, and emission reduction strategies.
  • S – Social: Assesses how the business builds relationships with employees, customers, communities, and partners, emphasizing labor rights, health & safety, social responsibility, and supply chain management.
  • G – Governance: Focuses on corporate governance structure, transparency, business ethics, risk control, and leadership accountability.
If a business is likened to a ship, ESG is the map that guides it on a long-term, safe course trusted by investors, customers, and society.

In other words, ESG not only helps companies “go far” but also “go right” – toward a future rooted in responsibility, efficiency, and credibility.

Risks Reduced by Applying ESG

Mitigating Environmental and Climate-Related Risks

One of the foundational pillars of ESG is the environment. Through ESG assessments, companies can determine their reliance on resources such as energy, water, and raw materials and measure the environmental impacts of their production and operations.

This allows them to proactively reduce greenhouse gas emissions, invest in clean technologies, or improve processes to reduce waste.

ESG in business and risk management – Mitigating environmental and climate-related risks

These actions not only lower operating costs but also prevent risks of fines, operational shutdowns, or damage to brand reputation in the eyes of customers and the community.

Preventing Social Crises and Labor Conflicts

The social pillar in ESG prompts businesses to re-evaluate all policies toward employees, customers, and surrounding communities.
Ignoring social factors can lead to strikes, lawsuits, negative press, or market boycotts.
Preventing social crises and labor conflicts – ESG in business and risk management

ESG integration requires companies to build clear policies on employee rights, gender equality, workplace safety, mental health, and community responsibility. This helps prevent social crises, retain internal teams, and foster long-term engagement.

Enhancing Compliance and Reducing Legal Risks

ESG in business and risk management are closely tied through compliance. Companies that implement ESG are more likely to stay up to date with legal requirements related to the environment, tax, labor, finance, and public disclosures.

Enhancing compliance and reducing legal risks – ESG in business and risk management

At the same time, ESG encourages building more transparent and robust internal control systems, helping minimize violations that could lead to litigation, fines, or reputational damage in capital markets and global supply chains.

Managing Financial and Investment Risks

One of the most frequent risks businesses face is financial risk due to a lack of transparency, investor distrust, or sudden market volatility.
ESG acts as an “insurance policy” by ensuring full disclosure, calculating environmental and social costs, assessing hidden risks, and building reliable reporting systems.
Managing financial and investment risks – ESG in business and risk management
Investors today value businesses with clear ESG frameworks because they see them as more transparent, risk-resilient, and better able to recover from crises.
ESG also opens access to sustainable investment funds, green capital, and premium valuation during fundraising.

Stabilizing the Supply Chain and Ensuring Continuity

A weak link in the supply chain can trigger major disruptions. ESG requires businesses to reassess suppliers, partners, and third parties based on environmental, social, and governance criteria.

 

Stabilizing the supply chain and ensuring continuity – ESG in business and risk management
Filtering out non-compliant or opaque suppliers enables companies to build more resilient and flexible supply chains.
Especially during global crises like pandemics or geopolitical upheaval, companies with structured ESG systems tend to recover faster, face fewer disruptions, and protect their market share more effectively.

Which Industries Are Under the Most Pressure to Adopt ESG?

Integrating ESG is becoming a mandatory standard in business, production, and investment across many countries — and Vietnam is no exception. While not every business must implement ESG at once, certain industries are facing more intense pressure from the market, customers, and regulatory bodies:

  • Manufacturing – Export – Processing: Often part of global supply chains, these sectors must meet standards on environment, traceability, labor ethics, and social responsibility to retain orders and market position.
  • Construction – Infrastructure – Real Estate: Given their impact on resources, environment, and communities, ESG helps these businesses manage risks while appealing to investors, buyers, and regulators.
  • Finance – Investment – Banking: ESG has become integral to risk assessment and investment decisions. Financial institutions are increasingly requiring ESG commitments from clients, partners, and portfolios.
  • Technology – Digital Platforms – E-commerce: Though less impactful environmentally, these sectors face stricter demands on data governance, privacy, transparency, and social responsibility.

Public Sector, SOEs, and Community-Focused Organizations: ESG enhances transparency, ethical operations, and effective implementation—critical as these entities are held to high public expectations.

ESG is no longer a “green certificate” or a checklist for display—it is now a substantive part of restructuring strategies, operations, and brand positioning. Businesses that recognize this early will lead in the sustainable development journey.

Conclusion

ESG is not an administrative file or a passing trend. ESG in business and risk management is the foundation for transparent, responsible, and sustainable operations in the long run.
Rather than reacting to risks too late, ESG empowers businesses to proactively manage environmental, social, and governance-related factors.
This is not only a way to protect the company—it is a strategy for creating long-term value and maintaining trust from investors, customers, and communities in the age of sustainability.

IBS – Your Partner in Effective ESG Implementation

Implementing ESG in a business is a long-term journey requiring accurate understanding, proper action, and the right partners.
At IBS – Institute for Business Solutions Training & Consulting – we provide a comprehensive solution ecosystem including:
  • Practical Training & Coaching
  • Strategic Consulting & Team Development
  • Business Networking
IBS is proud to be the exclusive partner of VOS Holdings Ecosystem Co., Ltd. in delivering Greenhouse Gas Inventory Training Programs according to ISO 14064-1 and Net-Zero roadmaps for banks and financial institutions in Vietnam.
The program is internationally standardized, locally adapted for Vietnamese implementation, and officially certified by Intertek, a globally reputable inspection and certification organization. The partnership between IBS – VOS Holdings – Intertek demonstrates IBS’s pioneering role in connecting Vietnamese businesses with international ESG standards and networks.
Contact IBS today for expert advice and to begin your ESG journey with the right strategy, effectiveness, and sustainability.

Công ty Cổ Phần Viện Đào Tạo & Tư Vấn Giải Pháp Doanh Nghiệp IBS

Viện Đào Tạo IBS

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