Integrating ESG principles into the core strategy and operations of consumer finance businesses is one of the prerequisites for promoting the sustainable development of the industry. The question is how to integrate ESG into corporate culture, and we look at what steps a leading consumer finance company has taken to implement a sustainability strategy.

In the first episode of Greennovate season 2, Jakub Kudrna, Chief Strategy Officer and Chairman of Home Credit Vietnam’s ESG Steering Group, shared his insights on sustainable directions for consumer finance enterprises. 

ESG strategy in the consumer finance industry

Developing sustainability values is now a core strategy of businesses in Vietnam and in the consumer finance industry, building a sustainable ecosystem and providing long-term benefits is not just a trend but also a commitment to the community, customers, and employees.

According to Jakub, a successful ESG strategy requires a close connection between several factors. If a business is financially successful, they can invest more effectively in ESG initiatives and when all ESG factors operate harmoniously, businesses not only succeed financially but also create a positive impact on the society, employees and the environment. In addition, pursuing sustainable development is not only a social responsibility but also a long-term strategy to foster customer’s trust and contribute to community development.

The following factors, cited by Jakub, are indicators of this ecosystem:

1. Environmental: While Home Credit’s ESG strategy may be more focused on social (S) and governance (G) aspects, when it comes to the environmental (E) element, Mr. Jakub feels that “Protecting the environment is a must for businesses”. For Home Credit this is the foundation of policy and so it has implemented several metrics which are reported in its annual Sustainability Report. These include fundamentals such as the monitoring of energy use and tracking of carbon emissions, as well as how employees commute to and from work. In addition, through offering customers effective digital experiences, the company is able to minimize use of paper, saving 84 million sheets of paper, equivalent to approximately 420 tonnes of paper in the last year alone, again alleviating pressure on the environment. 

2.Social: For financial enterprises, sustainable development should not only focus on profit but must also be people-centric. Among them, improving employees’ well-being, working conditions and motivating their career development should be the top priority. At the same time, the goal of providing inclusive financial solutions for customers also plays an important role. Home Credit aims to support those who are underserved by financial products in order to improve their lives. 

Additionally, Home Credit, with its social value, provides financial solutions to the unserved, who struggle to access them, thereby improving their status. By this way, it promotes sustainable development for the community and reduces inequality.

3.Governance: For Home Credit, risk management and transparency are decisive factors. To achieve sustainable success, businesses must build a robust risk management system and implement transparency principles in its operations. In addition, data and security are crucial factors in protecting customer information, building trust, and ensuring that they feel safe when using the company’s services.

“When all ESG factors operate harmoniously, businesses not only succeed financially but also create a positive impact on the society and the environment.
This is not only a social responsibility, but also a strategy for fostering customer’s trust and community development.”
- Jakub Kudrna, Chief Strategy Officer and Chairman of Home Credit Vietnam ESG Steering Group 

ESG is an integral part of the business strategy

A big question surrounding sustainable development strategies in businesses is: “What compromises do businesses need to make to pursue sustainable goals?”. According to Jakub, when embracing the ESG strategy, Home Credit does not see it as a trade-off or a sacrifice of other business objectives. Instead, Home Credit integrates ESG into its overall development strategy so that it can grow in parallel with the company’s core strengths. This means that ESG is not just a secondary goal but an integral part of the business strategy.

“The most effective ESG measure for businesses is employee welfare and customer satisfaction."

When implementing ESG as a strategy, businesses do not need to choose between profit and sustainable development, as ideally, both will complement each other. Sustainable development helps enhance consumer trust, attract talents, and create a solid foundation for long-term growth, thereby driving business efficiency. In summary, ESG is the business development strategy, not a trade-off but the path to achieving the company’s common goals sustainably and responsibly toward the society.

According to Jakub, the simplest way to integrate ESG into Home Credit’s strategy and create sustainable impacts is to continue developing the company’s core strengths, such as improving the risk management system, developing new financial products, and upgrading the mobile application. The focus of this strategy is to answer the question: “How can we enhance and expand our influence?” The business not only focuses on providing excellent service to its current customers, but it also strives to broaden its reach to new customers, particularly those who are unserved or underserved by financial products. Its objective is not only to enhance customer value, but also to generate positive and sustainable impacts for the community.

Measuring the impact of ESG on a company’s profit and long-term strategy

According to Jakub, companies must clearly understand how to develop their risk management framework in order to measure the long-term impacts of ESG strategies on profits, market position, and business objectives, in addition to return on investment figures. Among these factors, Jakub emphasizes the importance of the ratio between profit margin and risk cost. Managing the risk portfolio in a healthy manner plays a crucial role in maintaining the company’s sustainability, especially in the case of economic downturns or unexpected disasters, as well as the negative impacts of the market.

“Sustainability strategy is not only a social responsibility but also a corporate culture, where the influence does not stop at mere slogans or titles."

Besides, employee feedback plays a crucial role in measuring the effectiveness of ESG implementation. Every year, Home Credit collects feedback from employees through statistical methods to assess their pride in the company as well as the ESG values the business is implementing. According to Jakub, feedback from those directly involved in the company’s daily operations reflects ESG successes more accurately and realistically than boring theoretical concepts. This helps the business quickly identify whether it is on the right track or not.

In addition, the role of leadership is a key factor in driving the implementation of the ESG strategy and inspiring employees to participate. To ensure employees understand and commit to ESG goals, leaders must accompany their words with actions. Leaders must also establish an ESG culture that prioritizes actions and influence. This is evidence that a sustainability strategy is not only a social responsibility but also a corporate culture, where influence does not stop at mere slogans or titles.

In summary, the ESG strategy must align with the development of the business. This strategy not only benefits the environment and the community but also contributes to maintaining and enhancing the market position of the business.