' ’ -0O0-BÁO CÁO TÔNG KỂT ĐỀ TÀI NGHIÊN CỨU KHOA HỌC THAM GIA XÉT GIẢI THƯỞNG “NHÀ NGHIÊN cúù TRẺ UEH” NÀM 2024 GREEN CORPORATE SOCIAL RESPONSIBILITY AND THE IMPACT ON THE FINANCIAL CO
INTRODUCTION
Reasons for choosing the topic
Environmental issues have become a primary concern for humanity, as climate change threatens global prosperity by negatively impacting economic, social, and environmental aspects of life In just the last 50 years, 50% of the world's primary forests, ecosystems, and wildlife have been lost Vietnam is among the 10 countries most affected by climate change, particularly due to rising sea levels By 2030, the UNDP predicts that 45% of agricultural land may be destroyed or salinized, potentially displacing 22 million people and causing damage equivalent to 10% of GDP Thus, protecting the environment remains a crucial task in every era and location.
In recent decades, Corporate Social Responsibility (CSR) has gained significant attention from professionals and researchers, with Vietnam also embracing this trend Large-scale development and consumer goods enterprises have leveraged social responsibility commitments to penetrate demanding domestic and international markets According to Kamali Rezaei and colleagues (2020), CSR encompasses the responsibilities businesses must uphold to support their communities while linking economic and environmental benefits to sustainable growth Effective CSR implementation enhances competitive advantage and fosters sustainable development, highlighting its importance in today’s economy Consequently, companies voluntarily engage in CSR to satisfy stakeholders and contribute to long-term development and social security While CSR is well-established in developed countries, it remains relatively new in Vietnam, where government policies increasingly emphasize environmental protection As a result, many Vietnamese businesses are prioritizing environmental initiatives, leading to the emergence of the concept of “Green Social Responsibility.”
Green social responsibility in businesses focuses on utilizing renewable resources, like solar energy, to enhance profitability while minimizing energy consumption, safeguarding the ecological environment, and ensuring product safety A study by Ipos Company highlights that "Environmental Protection" ranks as one of the top two priorities in Corporate Social Responsibility (CSR), frequently adopted by businesses during their growth Thus, the social responsibility of a green company represents a crucial and distinctive dimension of its overall CSR commitment.
The implementation of social responsibility often conflicts with short-term business interests, as companies must allocate financial resources for environmental protection measures, including sustainable infrastructure and waste management This reluctance to fully adopt environmental practices stems from a lack of awareness and understanding of the long-term benefits of compliance with international standards Many businesses fail to recognize that neglecting their environmental responsibilities limits their access to new markets and higher customer segments, particularly in developed countries where profit potential is significant As economic activities continue to harm the environment, many companies prioritize immediate gains over sustainable practices, leading to detrimental impacts such as poor wastewater management and pollution A notable example in Vietnam is the Formosa Ha Tinh incident in 2016, which caused severe marine pollution, and the Vinh Tan 2 thermal power plant, which has adversely affected local air quality and community health.
Many companies in Vietnam still lack awareness and capability regarding green social responsibility, compounded by minimal external social pressure and weak state supervision To enhance the implementation of social responsibility, particularly for environmental sustainability, it is crucial to strengthen these areas The absence of effective enforcement and oversight mechanisms is a key reason for the inconsistent application of these responsibilities by businesses Nonetheless, the mindset of companies plays a significant role in influencing societal issues and can serve as a driving force for promoting the adoption of green social responsibility.
The implementation of social responsibility often conflicts with a company's short-term interests According to the Fung Global Institute, in 2020, bank loans represented 47% of total funding and 160% of GDP in Asia, with over 65% of this debt concentrated in Southeast Asian countries This highlights that debt and borrowing costs significantly influence business operations Despite numerous studies on social responsibility, research examining the relationship between environmental responsibility and financial costs remains limited Thus, the authors have chosen to focus on this critical topic.
This article examines the influence of green corporate social responsibility (CSR) on the financial costs of businesses in Vietnam, focusing on the environmental aspects It identifies key factors related to environmental responsibility that impact financial performance and offers strategic solutions for businesses to enhance their CSR initiatives The aim is to propose effective strategies that align with current and future business practices in Vietnam.
Research objectives
The authors aim to explore the relationship between green social responsibility and a company's financial costs, seeking to motivate businesses to adopt and fulfill their social responsibilities This initiative is intended to promote sustainable economic and social development, ultimately fostering a harmonious coexistence between humanity and the green environment.
From the general objectives, the author's group identifies 02 specific objectives to achieve the general objective are:
(1) Design, construct a model, analyze the impact of green social responsibility on the financial cost of Vietnamese businesses.
To enhance awareness of Corporate Social Responsibility (CSR) and environmental issues, businesses should implement targeted strategies that optimize financial costs By adopting sustainable practices, companies can not only reduce their environmental impact but also achieve their sustainable development goals Proposing innovative solutions and orienting efforts towards CSR can significantly improve a business's reputation and operational efficiency.
Research questions
How does the implementation of green social responsibility affect the financial cost of companies listed on the Vietnamese stock market?
How does the impact of implementing green social responsibility on the effectiveness of saving financial costs vary between companies in high-pollution industries and low-pollution industries?
How does the impact of implementing green social responsibility on the effectiveness of saving financial costs vary between slate-owned companies and non state-owned companies?
Subject and scope of the study
Research subjects: Social responsibility in terms of the environment and financial costs of businesses in Vietnam.
• Scope in terms of content: The impact of green CSR on the financial cost of businesses in Vietnam.
• Scope in terms of space: The research is conducted within the scope of businesses in the territory of Vietnam, with a number of 50 selected businesses.
This research analyzes financial reports, annual reports, and sustainable development reports from 2016 to 2022 for companies listed on the Ho Chi Minh City Stock Exchange (HOSE) in Vietnam.
Practical significance of the study
This article addresses the overlooked aspect of financing costs in prior studies by examining the financial implications of debt financing methods in Vietnamese enterprises It further explores the influence of green corporate social responsibility (CSR) on these financial costs, contributing valuable insights to both domestic and international research in this area.
The research can be used as a reference material, contributing to serving the research work on social responsibility for the environment to the effectiveness of businesses, especially financial costs.
• Effectiveness of education and training:
Conducting in-depth research as a student group enhances practical experience while simultaneously improving individual research skills and effectively applying knowledge acquired in the classroom.
Structure of the study
The research includes 5 main chapters, conducted as follows:
Chapter 1 Introduction: includes the reasons for conducting the research and an overview of the main contents related to the study.
Chapter 2 Synthesis of previous studies and research hypotheses: includes theoretical analysis and research hypotheses.
Chapter 3 Research methods: includes the design of the research model, in which the author’s group processes sample data, describes variables, and sets up experimental models.
Chapter 4 Research results: presents empirical analysis, including descriptive statistics, con-elation analysis, regression analysis, and reliability testing.
Chapter 5 Conclusion: presents the conclusions and policy implications in the authors' research.
SYNTHESIS OF PREVIOUS STUDIES AND RESEARCH HYPOTHESES
Overview of Corporate Social Responsibility (CSR)
CSR is difficult to define, each organization, company, government views CSR from different perspectives and viewpoints depending on their conditions, characteristics, and level of development (Nguyen, N T., 2010; Nguyen, D c., & Luu,
M D., 2008), different subjects have different perceptions of CSR (Wood, 2010) Therefore, so far, there has not been a consistent concept of CSR (Skudiene & Auruskeviciene, 2010) The concept of CSR was formed from the early days of the 1930s to 1953 when Bowen published the book “Social responsibilities of the Businessman" This document is considered the first milestone defining this topic According to Bowen, “CSR refers to the obligation of businesses to pursue policies, make decisions, or carry out activities to achieve the set goals and social values" This aims to propagate and call for asset managers not to infringe on the rights and interests of related parties, call for charity as a means to compensate for the damages caused by business activities that adversely affect society Coming to Maignan, Ferrell (2004) also gave the concept of CSR as follows: “A business has social responsibility when its decisions and actions aim to create and balance the various benefits of individuals and related organizations" According to Dahlsrud's report in 2006, CSR is “The description of the phenomenon where businesses act to achieve both economic, legal goals with social and environmental goals" Expectations about CSR change depending on today’s business environment, globalization process, and legal framework between countries However, the most concerned core issue is the balance of economics with legal regulations on environmental impacts In addition, there is an opinion that “CSR disclosure is a commitment of businesses to contribute to sustainable economic development through activities beneficial to businesses while improving the quality of life of workers, communities and society as a whole" - the viewpoint of the Private Economic Development Group of the World Bank on CSR This approach is fully understood about legal, economic, ethical, charitable, and environmental aspects At a workshop on corporate social responsibility and sustainable development organized by the Institute of Social Life Research, there is an opinion that “implementing corporate social responsibility is not only a trend but also a necessary condition for businesses, is a soft requirement for businesses”.
Corporate Social Responsibility (CSR) encompasses various definitions, but the most comprehensive one comes from the World Business Council for Sustainable Development in 2002, led by Nigel Twose It states that social responsibility involves businesses committing to sustainable economic development by enhancing the quality of life for workers, their families, and the broader community This definition emphasizes that companies must recognize the impact of their operations and take responsibility for their actions in society.
Corporate Social Responsibility (CSR) encompasses various definitions, but fundamentally, it emphasizes that businesses should not only focus on maximizing profits and building their brands but also actively engage in the sustainable development of the community.
Corporate Social Responsibility (CSR) is often misunderstood as solely focusing on charitable activities, overlooking its critical role in environmental protection As integral components of the economy, businesses must prioritize environmental actions to ensure their sustainability and growth Consequently, CSR is increasingly linked to environmental responsibilities within business operations Over the past fifty years, the concept of CSR has evolved into a comprehensive framework, guided by internationally recognized standards such as ISO 26000 and ISO 14001:2015 ISO 26000 outlines essential CSR criteria for businesses, including pollution prevention, sustainable resource use, climate change mitigation and adaptation, and the protection of biodiversity and natural environments Additionally, the ISO 14000 standard set emphasizes the importance of effective environmental management systems.
14001, focusing on the technical characteristics of the Environmental Management System; with the main goal aimed at minimizing negative impacts on the environment.
Advantages when implementing Green CSR
In the era of globalization, implementing corporate social responsibility (CSR) has become essential for Vietnamese companies seeking to enter the global market CSR not only benefits businesses and society but also enhances competitiveness at both the corporate and national levels It represents a commitment to ethical practices and sustainable development, making it a crucial element of business strategy Research from Harvard Business Review indicates that sustainable businesses achieve higher financial profits, and consumer interest in sustainable brands is on the rise, with 77% of consumers motivated to purchase from companies dedicated to positive societal impact Additionally, 73% of investors consider a company's commitment to environmental and social improvement as a key factor in their investment decisions.
Businesses play a crucial role in the economy and society, making corporate social responsibility (CSR) towards the environment an essential topic Environmental protection initiatives not only help ensure the sustainability and growth of a business but also serve as a fundamental pillar for its existence Recognizing the importance of the environment is vital for shaping business activities and strategies Consequently, actively implementing Green CSR can yield significant benefits for businesses.
Reducing costs and enhancing productivity are critical objectives for businesses across various sectors The environment is pivotal in this pursuit, as it supplies essential raw materials and fuel for production By prioritizing environmental protection, companies can secure stable output with high-quality resources, minimize waste associated with inferior materials, and mitigate risks of disruptions in the production process, ultimately leading to lower production costs.
To effectively tap into diverse customer sources, businesses must recognize the significant shift in consumer preferences Today's consumers are increasingly discerning and prioritize green products that promote environmental conservation and sustainability.
(3) Consolidate position, enhance brand value and company reputation.
(4) Create opportunities to access (penetrate) new markets, especially international markets.
(5) Exploit opportunities from implementing green social responsibility.
(6) The loyalty of employees and customers (Cung & Minh, 2008)
Overview of main theories
The authors synthesized previous studies by employing four key theories to elucidate the connection between corporate social responsibility (CSR), environmental impact, and financial efficiency in businesses: shareholder theory, agency theory, stakeholder theory, and signaling theory.
The shareholder theory, rooted in business principles, posits that a company's primary objective is to maximize profit This foundational concept has shaped the understanding of social responsibility, with economist Milton Friedman being a key proponent.
In the early 1960s and 1970s, it was argued that companies should prioritize profit maximization without the obligation to implement corporate social responsibility (CSR), focusing solely on shareholder interests This narrow perspective has resulted in limited and ineffective CSR practices However, this viewpoint sparked significant criticism from scholars and stakeholders, leading to the development of various philosophies, including agency theory and stakeholder theory, as well as the pyramid scale of social responsibility, which categorizes the different levels of responsibility that companies hold towards their stakeholders and society at large.
Agency theory, as articulated by Jensen and Meckling (1976), addresses the conflicts of interest between business owners and managers, commonly known as the "agency problem." This theory posits that the costs associated with corporate social responsibility (CSR) may outweigh the benefits, adversely affecting a company's profitability (Friedman, 1970) In the current economic landscape, transparency in social and environmental information can create advantages in contractual obligations but may also lead to conflicts between informed managers and less-informed shareholders (Reverie, 2014) The crux of the agency theory concerning environmental regulations is that managers might prioritize personal wealth over the allocation of resources for projects that enhance financial efficiency Consequently, CSR initiatives can significantly influence a company's performance and financial stability, potentially diminishing shareholder value Auperle et al (1985) further emphasize that businesses investing in pollution control may face costs that impact their competitive pricing and profits, underscoring the necessity for managers to balance CSR investments with operational efficiency to enhance shareholder wealth.
Numerous authors have significantly contributed to the research on social responsibility, highlighting its complexity and importance Notable works include Jensen and Murphy (1990), who explored various aspects of the topic, and Wright and Ferris (1997), who further illuminated its significance Additionally, Dhaliwal et al (2011) provided valuable insights through extensive research, while other contributors such as Oh et al (2011), Reverie (2014), and Chang et al (2015) have enriched the literature surrounding social responsibility.
Sustainable development and corporate social responsibility are closely linked to the concept of "stakeholders," who play a crucial role in enhancing a business's wealth creation potential (Post et al., 2002) The stakeholder theory, introduced by Robert, emphasizes the importance of considering the interests of all parties involved in a company's operations.
K Merton and James D Thompson for the first time in 1977 This is one of the central theories forming the foundation for the development of the CSR research field The stakeholder perspective emerged as a replacement for the shareholder theory according to Spence and colleagues (2001) The stakeholder theory is a framework that helps managers understand how best to manage their company’s relationships with various stakeholders with the suggestion that these relationships should benefit both parties and not harm any individual or group Freeman (1984) argued that a business can only exist if it can meet the requirements of stakeholders Also according to Freeman (1993), the stakeholders of a company include those who are very important for the existence and success if understood narrowly Conversely, if understood more broadly, it is any group or individual who can influence or be influenced by the company, it could be customers, employees, suppliers, To stabilize development, businesses should pay attention to the interests of stakeholders and consider their perspectives and activities Then, the company itself is actively implementing activities in CSR with stakeholders, this accelerates the growth rate, prosperity of the company Along with that, the company will be highly evaluated, credit score has a soaring, more prestigious and the company image becomes beautiful in the eyes of investors This will be extremely convenient in accessing long-term loans for that company From there, the authors found that CSR has a positive relationship with the debt maturity structure.
According to Jensen and Meckling (1976) and further developed by Myers (1977), businesses that prioritize social responsibility can enhance their market reputation by issuing short-term debt This financial strategy not only signals the company’s quality but also reflects its financial health, as evidenced by research from Flannery (1986) and Diamond and Rajan (2001), while also addressing concerns related to income volatility, as discussed by Stohs and Mauer.
1996) when they can control the financial and interest rate risks of short-term borrowing
To address information asymmetry between mobilizers and financiers, companies will improve signaling by sharing details about their activities, thereby bridging gaps among stakeholders Additionally, firms engaged in Corporate Social Responsibility (CSR) can benefit from lower borrowing costs when issuing short-term debt This research indicates that there is an inverse relationship between CSR practices and the structure of debt maturity.
Research indicates that companies engaged in Corporate Social Responsibility (CSR) tend to have lower credit risk ratings, as these firms are perceived to exhibit superior risk management (Feldman et al., 1997) Rating agencies incorporate this non-financial information into their evaluations (Atlig et al., 2013) Consequently, firms with strong CSR practices signal quality to the market, particularly when issuing short-term debt Additionally, these companies benefit from more favorable conditions and reduced borrowing costs associated with their CSR initiatives (Goss and Roberts, 2011).
In conclusion, the theoretical perspectives outlined highlight the motivations behind corporate transparency in CSR disclosures This understanding forms a crucial basis for developing a comprehensive theoretical framework that examines the effects of green CSR implementation on companies' financial costs.
Overview of previous studies
In recent years, the global community has confronted the critical challenge of balancing economic growth with environmental protection, leading to heightened concerns about corporate green CSR and its connection to sustainable development For companies in the knowledge economy, disclosing environmental resource usage in annual reports has become essential, attracting significant attention from various stakeholders, including researchers Green corporate social responsibility emphasizes the pursuit of renewable resources, such as solar energy, while aiming to maximize profits, reduce energy consumption, protect the ecological environment, and ensure product safety Additionally, some scholars view green CSR as a reflection of the assessment of water, energy, and raw material usage.
In recent years, the intersection of corporate social responsibility (CSR) and financial decision-making has emerged as a vital area of research This focus not only enhances a company's market prestige but also fosters accountability to customers and the community CSR serves as a crucial communication tool, enabling businesses to effectively convey information to potential investors Numerous scholars, including Chuah et al (2020) and Jeon et al (2020), have explored the relationship between social responsibility and various business activities, particularly its influence on consumer behavior Additionally, comprehensive studies by Cheung (2016) and Gelb and Slrawser have highlighted CSR's impact on policy and financial decisions, underscoring its significance in today's corporate landscape.
(2001), and Weber and Saunders-Hogberg (2020), or impact on the cost of capital use of businesses evidenced by the study of Chen & Zhang, (2021); El Ghoul and colleagues, (2011); Goss & Roberts, (2011).
Firstly, it is believed that good implementation of environmental responsibility of businesses will bring benefits:
Companies that prioritize green responsibility can enhance their internal motivation and access valuable intangible resources, leading to increased innovation and efficiency Additionally, embracing green social responsibility not only aligns with consumer demands and boosts the company's image but also contributes to a greater market share.
In response to external pressures such as market, ownership, social, and legal demands, businesses are increasingly prioritizing environmental initiatives Companies should aim to establish a strong image centered on green social responsibility as a long-term strategic objective, supported by effective policy design Research indicates that a company's social efficiency is positively correlated with its credit rating and can lead to lower capital financing costs Additionally, potential litigation risks introduce uncertainty that may elevate future liquidity risks, impacting financial structure and costs Ultimately, engaging in social responsibility initiatives can enhance both financial and operational efficiency (Weber & Saunders-Hogberg, 2020) and increase overall business value (Chang et al., 2019; Deng et al., 2013).
The commitment to green social responsibility extends the concept of corporate social responsibility (CSR) into environmental protection, highlighting its significance within CSR frameworks Research indicates that effective corporate governance and stringent disclosure standards can lower capital costs by mitigating agency problems and information asymmetry Studies by Hail and Leuz (2006) and Nguyen et al (2018) support this assertion Lindblom posits that implementing CSR and disclosing related information are strategic behaviors for companies Additionally, Dhaliwal et al found that in stakeholder-oriented countries, the disclosure of non-financial information correlates positively with analysts' prediction accuracy, suggesting that CSR performance can enhance a company's financial efficiency.
Chollet and colleagues highlight that effective corporate management and social responsibility can mitigate financial risks and promote environmental sustainability Spicer (1978) emphasizes that institutional investors prioritize companies with high corporate social responsibility (CSR) indices, as these firms exhibit greater transparency, leading to lower perceived risks This transparency enables more efficient allocation of financial resources, enhancing market liquidity In environments with limited information discrepancies, financial institutions can accurately assess loan risks, while a lack of transparency compels them to impose higher interest rates Thus, strong CSR performance reduces information asymmetry, underscoring the significant link between green social responsibility and corporate finance.
2.4.1 Green CSR and financial costs
CSR strategies play a crucial role in influencing a business's access to financial resources This article explores the effects of green responsibility on financial costs through the lenses of agency theory, signaling theory, and environmental regulation theory Research by Judd and Lusch (2018) highlights a positive correlation between social responsibility and financial costs, while opposing studies by Albuquerque et al (2019) and El Ghoul et al (2011) suggest an inverse relationship Additionally, Sharfman and Fernando (2008) argue that enhanced environmental risk management can lead to reduced capital costs, indicating that a strong commitment to social responsibility may lower financial risks and costs Conversely, Waddock and Graves (1977) contend that irresponsible environmental practices can lead to higher overall costs when competitiveness is compromised Cheng et al (2014) found that businesses with superior CSR performance face fewer capital constraints, while Gregory et al (2016) suggest that the relationship between CSR and financial costs may not always be clear-cut.
Researchers identify two key justifications for this phenomenon Firstly, they emphasize that enhancing stakeholder participation is crucial in alleviating capital constraints Secondly, they highlight the importance of increasing transparency in corporate social responsibility (CSR) performance, which fosters trust and credibility among stakeholders, ultimately leading to better access to capital and lower capital costs.
Enhancing stakeholder participation through corporate social responsibility (CSR) signals operational efficiency and fosters better relationships with key stakeholders, positively influencing financial performance By committing to CSR, companies can encourage greater stakeholder engagement, mitigate short-sighted behaviors among board members, and lower representation costs (Eccles et al., 2014) However, discrepancies in the views of creditors, target customers, and the company regarding green social responsibility can lead to representation challenges.
• Enhancing information transparency: In addition, previous studies have also emphasized the importance of information asymmetry in clarifying issues related to a business’s financial costs, through studies by Dcrricn Ct al
Inadequate disclosure of a company's green social responsibility (CSR) can lead to increased financial costs for investors, as they must gather more information amidst higher information asymmetry Leland and Pyle (1977) highlighted that lending organizations often impose higher interest rates to mitigate risks associated with uncertainty in assessing borrowers' profiles To counteract this, Nguyen et al (2018) suggested that companies can reduce borrowing costs by actively addressing information asymmetry through transparent CSR practices Businesses with strong CSR performance not only enhance their transparency but also reap benefits such as improved liquidity, lower capital costs, and better financial resource allocation, as noted by Christensen et al (2019) Additionally, research by Lins et al (2017) established a positive link between CSR engagement and financial efficiency, indicating that companies prioritizing CSR can achieve greater profits and revenue growth Furthermore, while these companies may have higher debt ratios due to funding their CSR initiatives, the overall evidence supports that enhanced CSR levels correlate with superior financial performance, including profit, revenue growth, and employee productivity Importantly, the lack of carbon information disclosure is significantly linked to increased financial costs, emphasizing the need for transparency in carbon-related practices.
• Reducing the risk of penalties due to violations of environmental policies:
As environmental regulations tighten, companies that adopt green social responsibility can mitigate the risk of penalties and lower costs by proactively disclosing their sustainability efforts This transparency not only reduces financial burdens but also attracts market rewards for responsible practices In Vietnam, the government has launched the "National Action Plan to implement the 2030 Agenda for Sustainable Development" through Decision No 622/QD-TT (2017), aligning with the United Nations' sustainable development goals Additionally, the Prime Minister's Decision No 1393/QD-TTg establishes the "National Strategy for Green Growth," promoting sustainable economic development.
In 2023, the Prime Minister announced Decision No 841/QD-TT, outlining the roadmap for achieving Vietnam's sustainable development goals by 2030 Additionally, the Minister of Finance signed Decision No 2183/QD-BTC on October 20, 2013, to support this initiative within the finance sector.
The Finance sector's Action Plan for implementing the National Strategy for Green Growth by 2020 focuses on enhancing environmental protection through the introduction of legal regulations In July, the Ministry of Finance recommended that the Government establish policies to limit environmentally harmful behaviors, including environmental protection taxes, resource taxes, and special consumption taxes on polluting goods Additionally, the plan includes supportive measures to encourage environmental protection activities, aiming to reduce pollution and mitigate the impacts of climate change.
This study aims to explore the multifaceted effects of a business's green social responsibility on the financial costs of publicly listed companies in Vietnam, addressing the varied findings and conclusions from previous research in this area.
HI Companies implementing green social responsibility can significantly reduce financial costs.
2.4.2 High-polluting companies, green CSR, and the company's financial costs
High-polluting companies must actively implement green corporate social responsibility (CSR) initiatives to reduce carbon emissions and enhance environmental protection efforts However, the unique nature of these companies, coupled with external pressures, often leads to increased financial costs associated with green CSR High-polluting firms face elevated carbon risks and stricter legal scrutiny from environmental agencies, resulting in higher compliance costs and potential litigation risks The 2017 Penal Code has intensified penalties for environmental violations, allowing fines up to 20 billion VND and operational suspensions of up to three years, with severe consequences potentially leading to permanent closure Additionally, banks now consider environmental protection performance during credit evaluations, integrating CSR compliance into their assessment processes.
RESEARCH METHODS
Research procedures
To carry out the research work, the authors have designed and implemented the research process as follows:
(1) Identify the objective, research problem
(6) Data analysis using Stata software
(7) Presenting research results and discussion
Research methods
This article employs a quantitative research method utilizing secondary data from audited financial reports of companies listed on the Ho Chi Minh City Stock Exchange (HOSE) to assess the impact of green social responsibility on business financial costs through descriptive statistical analysis Descriptive statistics are essential for summarizing and presenting data characteristics, providing insights into the general landscape of Vietnamese enterprises and their commitment to green social responsibility The authors apply multivariate regression analysis using the ordinary least squares (OLS) model; however, they recognize the potential issues of autocorrelation and heteroscedasticity that may compromise result accuracy To address these concerns, alternative models, including the random effects model (REM) and fixed effects model (FEM), are utilized, with the F-test and Hausman test helping to determine the most suitable model If shortcomings persist in autocorrelation or heteroscedasticity, the authors employ the generalized least squares (GLS) model for corrections, utilizing Stata 14.0 software for their analysis.
Data
The authors investigated the effects of green corporate social responsibility (CSR) on the financial costs of businesses by analyzing secondary data from annual reports and sustainability practices of 100 companies listed on the Ho Chi Minh City Stock Exchange between 2016 and 2022.
To ensure the reliability of the data source of 100 companies listed on the Ho Chi Minh City Stock Exchange, the authors selected companies that satisfy two conditions:
As of July 25, 2023, the VN100 stock basket on the HOSE comprises large-cap companies, including stocks from the VN30, which features the 30 highest market capitalization and liquidity stocks in Vietnam, and the VN Midcap, which includes 70 mid-cap stocks Together, these stocks represent the 100 strongest companies in Vietnam, characterized by significant market capitalization, liquidity, and high free transfer rates.
From 2016 to 2022, comprehensive disclosure of annual reports and financial results is essential for authors to gather financial indicators and company information This transparency facilitates the assessment of the impact of green Corporate Social Responsibility (CSR) on financial costs.
The authors eliminate specially treated companies (ST) and companies lacking data; thus, a total of 50 company samples, 350 observations were obtained.
The research time is chosen from 2016 to 2022 The 2016 milestone was chosen because this is the time after the issuance of Circular 155/2015/TT-BTC dated October
On June 6, 2015, the Ministry of Finance issued a directive regarding disclosure requirements in the securities market, mandating that listed companies include information about their social responsibility in either their annual reports or separate documents Appendix IV of this circular specifically outlines the need for transparency in environmental and social information.
In 2021, Circular 96/2020/TT-BTC was introduced to replace Circular 155/2015/TT-BTC, altering the scope and limitations of company disclosures The criteria outlined in Appendix IV of Circular 155/2015/TT-BTC remain unchanged, ensuring the objectivity, accuracy, and credibility of the research data Additionally, on September 15, 2015, the International Organization for Standardization (ISO) released the ISO 14001:2015 standard, incorporating significant improvements to align with contemporary needs The latest business information is set to be published in 2022.
Green CSR data is evaluated across three key dimensions: positive green CSR (Env), negative green CSR (Env_con), and the net value of green CSR (dEnv) Here, Env encompasses activities that positively affect the environment, while Env_con includes those that have adverse environmental impacts The net value, dEnv, represents the difference between these two measures Data collection is conducted manually.
High-polluting companies exhibit a greater concern for green corporate social responsibility (CSR) issues compared to other businesses Consequently, the analysis categorizes the sample based on the classification of industries as either high-polluting or not.
In 2018, the Ministry of Natural Resources and Environment launched a project focused on "Special control for facilities with high environmental pollution risk" to proactively prevent environmental incidents and hotspots The initiative outlined priority tasks and identified 16 industrial production types with significant pollution risks, including metal ore exploitation, metallurgy, paper and chemical production, dyeing, leather tanning, oil refining, coal thermal power, waste recycling, electroplating, battery manufacturing, clinker production, rubber latex processing, cassava starch processing, sugar cane processing, and seafood processing This project aims to establish criteria for assessing pollution risks and environmental incidents effectively.
Research model
This research employs a structured model approach, with Models 1-3 addressing hypothesis 1, Models 4-6 focusing on hypothesis 2, and Models 7-9 examining hypothesis 3 The authors anticipate that positive green corporate social responsibility (CSR) and the net value of green CSR will significantly lower financial costs, indicating an inverse correlation Conversely, negative green CSR is expected to enhance COD, reflecting a positive correlation.
Model 1 COD = Env + Size + Lev + ROA + First + Ind + Dual 4- Age + 8
Model 2 COD = Envcon 4- Size 4- Lev 4- ROA 4- First + Ind 4- Dual 4- Age 4- €
Model 3 COD = dEnv 4- Size 4- Lev 4- ROA 4- First 4- Ind 4- Dual 4- Age 4- 8
Model 4 COD = Env 4-High4- Env*High 4- Size 4- Lev 4- ROA 4- First 4- Ind 4- Dual 4- Age 4- 8
Model 5 COD = Env_con 4- High 4- Env_con*High 4- Size 4- Lev 4- ROA 4- First 4- Ind 4- Dual 4- Age 4- 8
Model 6 COD = dEnv 4- High 4- dEnv * High 4- Size 4- Lev 4- ROA 4- First 4- Ind 4- Dual 4- Age 4- 8
Model 7 COD = Env 4- Soe 4- Env * Soe 4- Size 4- Lev 4- ROA 4- First 4- Ind 4- Dual 4- Age 4- 8
Model 8 COD = Env_con 4- Soe 4- Env-con * Soe 4- Size 4- Lev 4- ROA 4- First 4- Ind 4- Dual 4- Age 4- 8
Model 9 COD = dEnv 4- Soe 4- dEnv * Soe 4- Size 4- Lev 4- ROA 4- First 4- Ind 4- Dual 4- Age 4- 8
Measuring variables in the model
The dependent variable is a variable that is affected by another variable in the model.
COD, or Cost of Debt, serves as the dependent variable in this study, representing financial costs It is calculated as the ratio of interest expense to the average of beginning-of-period and end-of-period debt for the fiscal year This formula is based on the research conducted by Zou and Adams (2006) and was utilized in the 2020 study by Duan Ji and colleagues.
The independent variable plays a crucial role in influencing the dependent variable within a model In this context, the model incorporates various independent variables, such as positive green corporate social responsibility (CSR), negative green CSR, and the net value of green CSR.
In Vietnam, the mandatory disclosure of social responsibility information for listed companies, as outlined in Circular No 155/2015/TT-BTC, took effect on January 1, 2016 This regulation marks a significant advancement toward establishing a sustainable financial market and enhances Vietnam's appeal to international investors According to Clause 2, Article 8, Chapter II of the circular, businesses are required to report on their environmental and social impacts, including aspects such as raw material management, energy and water consumption, and compliance with environmental protection laws.
CSR has been measured in various approaches However, based on the research of Duan J and colleagues published in 2020, the authors evaluate the Env aspect including 8 standards, specifically:
1 Does the business produce environmentally friendly products?
2 Does the business apply environmentally friendly policies such as developing technology to reduce emissions, waste of gas, water, sludge, or greenhouse gases?
3 Does the business apply policies or regulations encouraging the use of renewable energy and participating in the circular economy?
4 Does the business have energy-saving policies or techniques?
5 Does the business have a green office policy?
6 Is the company’s environmental management system certified according to the
14001 standard of the International Organization for Standardization (ISO)?
7 Does the business receive environmental recognition or other positive evaluations?
8 Other aspects of the business’s positive implementation of environmental responsibility are not mentioned in the above indicators.
The scoring results are detailed in Appendix 2 to reduce the subjectivity of the authors in scoring these criteria.
Negative green CSR (Env_con) refers to the negative green social responsibility behavior of companies in violating and being penalized for the environment and pollutant emissions.
The authors analyze reports to gather information on green CSR standards, utilizing a binary encoding system Companies earn 1 point for activities aligned with these standards and 0 points for non-compliance After scoring each company against the standards annually, the authors aggregate the scores to calculate two indices: Env and Env_con.
The net value of green CSR behavior (dEnv) is the difference between the two variables Env and Env_con.
The size of a company significantly influences its financial and social responsibility, with larger firms typically enjoying easier access to long-term debt due to their higher credit quality, as determined by the logarithm of total assets (Scholtens & Feng, 2013) In contrast, smaller companies often struggle to secure long-term financing, facing challenges such as increased information asymmetry and conflicts between shareholders and management (Diamond, 1991; Ben-Nasr et al., 2015) Research by Beven and Danbolt (2002) indicates that a company's scale is inversely related to short-term debt while being directly proportional to long-term debt Larger firms also benefit from lower risk and economies of scale, which can reduce their debt costs (Blackwell et al., 1998; Petersen & Rajan, 1994).
Financial leverage (LEV) is defined as the ratio of long-term debt to total assets, representing the use of borrowed capital to expand a company's asset base and generate returns on invested capital Companies with higher financial leverage face increased risks of insolvency, as they may struggle to meet financial obligations This heightened leverage results in greater debt-related costs, including interest payments Chava and Roberts (2008) highlighted the critical relationship between financial leverage and the risk of default, along with the subsequent rise in debt expenses.
The Return on Assets (ROA) ratio measures how efficiently a business utilizes its assets to generate net profit, reflecting the management's effectiveness A higher ROA indicates a more effective arrangement and management of assets, suggesting that a company can achieve significant profits with minimal asset investment This makes a business with a high ROA more favorable than one that heavily invests in assets but yields lower profits It's important to note that ROA can vary significantly across different industries.
The age of a company plays a crucial role in establishing its credibility and industry relationships An established business often benefits from a wealth of connections and trust built over time, which can significantly influence its operations and overall success.
In addition, there are some other variables, listed in the table below:
Table 3.1 Measurement of variables in the model
COD = Interest expense X 100 / (Opening debt + Closing debt) / 2
COD is the interest expense per Vietnam dong when using debt
The Env metric comprises eight components structured according to a specific scale It assigns a value of 1 for positive actions related to the company's green social responsibility (CSR), while a value of 0 indicates the absence of such actions The overall Env score reflects the cumulative results of all criteria assessed.
Companies exhibiting negative green social responsibility behaviors contribute to environmental harm and pollution, represented by the variable I, which is 1 in such cases and 0 otherwise The independent variable dEnv reflects the disparity between the Env and Env_con variables Additionally, the size of the company is controlled for by using the natural logarithm of total closing assets.
ROA Control variable Return on assets ratio
First Control variable Ownership ratio of the largest shareholder
Lev Control variable Leverage is measured by the total long-term debt divided by the total closing assets
Ratio of independent members in the Board of Directors = number of independent members / Total number of board members
Dual Control variable Dual = 1, if the Chairman of the Board of
Directors is also the CEO, otherwise, Dual = 0
Number of years the company has been operating from the start of establishment to the present time
Age = Research year - Establishment year
Soe Control variable SOE for state-owned companies is 1, for non state-owned companies is 0
The model incorporates year and company name variables to account for individual fixed effects, effectively controlling for time-related factors and the unique operational characteristics of each company.
Fixed Effects: A set of dummy variables to control fixed effects from business factors, countries, industries, and changing economic trends over time.
In Chapter 3, the authors detail the research methodology, including the selection and measurement of variables and data collection processes Utilizing a quantitative analysis approach, they examine the effects of green social responsibility and financial costs across 50 high-capitalization listed companies from various sectors The chapter includes tables and diagrams to effectively summarize the research procedures and processes Data is processed using the Stata tool, leading to insightful analysis results and conclusions, which will be elaborated on in the following chapter.
RESEARCH RESULTS
Data cleaning
Before implementing the models, the authors address outlier values, a crucial step to eliminate abnormal observations that could bias research results Values below the 5th percentile are replaced with the 5th percentile value, while values above the 95th percentile are replaced with the 95th percentile value.
Descriptive statistics
The descriptive statistical analysis conducted using STATA 14 software reveals the mean values, standard deviation, minimum, and maximum of both independent and dependent variables, as detailed in Table 4.1 (Appendix 1) The study utilizes financial statement data from 50 listed companies with the highest market capitalization, ensuring comprehensive data collection from 2016 to 2022, resulting in a total of 350 observations.
Table 4.1 Descriptive statistical results of the research model variables
Number of observations Mean Standard deviation Min value Max value
(Source: Analysis results of the authors from STATA software)
The research reveals that the average financial cost among the sampled Vietnamese enterprises is 2.49, with a range from 0.02 to 5.8, highlighting significant disparities between companies like Vinh Son - Song Hinh Hydropower Joint Stock Company and Refrigeration Electrical Engineering Corporation Financial costs pose a considerable challenge for Vietnamese businesses, particularly in the aftermath of the Covid-19 pandemic, which severely disrupted the economy Small and medium-sized enterprises (SMEs) face difficulties in securing loans due to their limited scale and collateral, resulting in banks often deprioritizing them for lending opportunities, as noted by Mr Chairman of the Vietnam Chamber of Commerce and Industry.
Vu Tien Loc highlights that Vietnamese businesses face significantly higher capital costs, with interest rates nearing 8% per year in 2022, the highest in the region Additionally, small enterprises are compelled to borrow approximately 6% of their total investment from the black market.
The average score of 3.85 for the independent variable Env, reflecting positive environmental actions in Vietnam, highlights the challenges faced by the country as a developing nation With most Vietnamese businesses being small to medium-sized and averaging around 30 years in age, their financial and technological capabilities are limited, hindering their ability to engage in comprehensive social responsibility initiatives Corporate Social Responsibility (CSR) is a relatively new concept in Vietnam, emerging over the past decade, and businesses often encounter significant cost barriers However, notable companies such as An Phat Xanh Plastic Joint Stock Company, Saigon Beer - Alcohol - Beverage Joint Stock Corporation, and Vinamilk are making strides in this area Vinamilk's "One Million Green Trees" program, initiated in 2012, has successfully planted over 250,000 trees across 20 provinces, significantly contributing to Vietnam's natural ecosystem An Phat (AAA) aims for sustainable development through its AnEco brand, offering biodegradable products and implementing a solar energy project that is expected to save VND 12 billion in electricity costs annually while reducing CO2 emissions by 4,000 tons per year.
The Env_con and dEnv indices represent the negative green CSR indicator and the net value of positive and negative green CSR, with average values of 0.0028 and 3.85, respectively While most businesses face no environmental penalties, Duc Giang Chemicals Group Joint Stock Company reported a fine of VND 15,000,000 for non-compliance with environmental regulations This incident occurred in Hung Yen when raw material beads were inadvertently spilled into the rainwater drainage system, resulting in blue water contamination and exceeding environmental quality standards Despite this, the overall analysis of these indices indicates a relatively optimistic performance in green CSR among listed companies in Vietnam.
The average Return on Assets (ROA) stands at approximately 8.3%, indicating that every dong of assets generates 8.3 dongs in net profit This metric serves as a key indicator of the management team's effectiveness The ROA fluctuates significantly, ranging from nearly 0% to as high as 23% This variability highlights the challenges companies face in maintaining consistent profitability, with some achieving a robust 23% return on total assets, while others struggle to generate any profit at all.
The total asset size of companies varies significantly, with Hoang Anh Gia Lai Joint Stock Company reporting assets of approximately 18.44 trillion dong in 2021, while VINGROUP - JSC reached an impressive 577.41 trillion dong in 2022 The average asset size across these companies stands at around 24.57 trillion dong, reflecting the diverse financial landscape within the industry.
The company's risk level, as indicated by the business leverage index (Lev), averages 0.14, suggesting a long-term debt ratio of 14% of total assets This indicates that most companies experience relatively low financial risk, with each dollar of assets carrying 0.14 dollars of long-term debt However, the risk level varies significantly, ranging from 0% to 45.6%, highlighting a notable disparity in debt-to-asset ratios among companies.
The sample enterprises have an independent board member ratio of 0.24, aligning with the requirements set forth in the 2020 Enterprise Law, which specifies the standards for independent board members as outlined in Article [insert article number].
To enhance objectivity in decision-making, it is essential that at least 20% of board members are independent, particularly in conflict of interest situations The average occurrence of a CEO also serving as Chairman of the Board is relatively low at 0.15 Separating these two roles clarifies the distinct responsibilities of the board, reduces contradictions in supervisory activities, and streamlines evaluation and remuneration processes This separation allows the Chairman to effectively represent the board in communications with shareholders and the market.
The data exhibits a significant standard deviation due to its random selection across various industries These statistical findings accurately represent the overall reality of the companies within the research sample.
Correlation coefficient analysis
Before regression analysis, to ensure the reliability and efficiency of the model, the authors cany out the following validation steps:
The partial correlation test of regression coefficients involves analyzing collected data using Pearson correlation to assess the relationship between the dependent variable and independent variables, as well as among the independent variables themselves The correlation coefficient serves as a statistical measure to illustrate these relationships, with higher values indicating stronger connections and lower values suggesting weaker ones According to the Pearson correlation scale, coefficients ranging from 0.0 to 0.3 signify no correlation, 0.3 to 0.5 indicate weak correlation, 0.5 to 0.7 reflect high correlation, and values between 0.7 and 1 denote a tight correlation, with a value of 1 representing perfect correlation Additionally, a positive coefficient suggests a direct relationship, where both variables move in the same direction, while a negative coefficient indicates an inverse relationship, where one variable increases as the other decreases Ultimately, the magnitude and sign of the correlation coefficient reveal the nature of the relationship, distinguishing between positive and negative correlations.
Multicollinearity test between independent variables by calculating the VIF value with the average VIF less than 2 then multicollinearity does not occur.
According to the results of the correlation matrix:
Table 4.2 Pearson correlation coefficient matrix
COD Env Env_con dEnv Size ROA Lev First Indp Dual Age
Note: *, ** and *** correspond to statistical significance levels of 10%, 5% and 1% respectively
(Source: Analysis results of the authors from STATA software)
The analysis reveals a strong and statistically significant correlation between the COD variable and the dEnv variable, indicating that dEnv has the most substantial impact on COD compared to other independent variables.
The analysis reveals that all pairs of independent variables are correlated, with the Env and dEnv variables showing the strongest and most significant correlation coefficient This high correlation is attributed to the fact that Env and Env_con contribute to the formation of dEnv, leading to multicollinearity issues Consequently, this study distinguishes between indices related to environmental responsibility and their impact on business financial costs, utilizing models where Env, Env_con, and dEnv are treated as independent variables This approach aligns with the findings of previous empirical research conducted by Duan Ji and colleagues (2020).
The authors utilize the variance inflation factor (VIF) to reassess the issue of multicollinearity following the application of a corrective solution, with the findings displayed in the accompanying table.
Table 4.3 Variance Inflation Factor (VIF)
Variable Model 1 (Env) - VIF Model 2 (Env_con) -
(Source: Analysis results of the authors from STATA software)
The test results show that all variables used in the model have a VIF coefficient
< 2 and 1/VIF or TOL > 0.5; thus leading to the conclusion that multicollinearity is not a concern (According to Greene 2002; Hair & colleagues 2010).
To evaluate the influence of green Corporate Social Responsibility (CSR) on business financial costs, the authors categorize green CSR into three distinct scales: positive green CSR (Env), negative green CSR (dEnv), and the net value of green CSR (dEnv).
The authors employ a multivariate regression analysis to examine the relationship between dependent and independent variables, selecting the most suitable regression technique and evaluating the model's deficiencies For panel data, they utilize ordinary least squares (OLS), random effects regression (REM), and fixed effects regression (FEM) to assess how various factors influence the financial costs of a business.
The Pooled OLS multivariate regression model, designed for cross-sectional data and accounting for year effects (Cameron and Trivedi, 2008), will be employed to examine the relationship between the CSR index and profit management However, this model's limitation lies in its overly restrictive assumptions regarding cross-units, which may not reflect real-world scenarios To address these shortcomings, the Fixed Effects Model (FEM) and Random Effects Model (REM) will also be utilized.
The Random Effects Model (REM) posits that individual effects are random variables that remain unobserved and are not correlated with the variables related to published information or the predictive variables within the model.
The Fixed Effects Model (FEM) recognizes that each business unit possesses unique characteristics influencing the execution of green social responsibility (GSR) By analyzing the correlation between the residuals of each unit and their GSR implementation, FEM effectively isolates the impact of these individual traits, allowing for a clearer estimation of GSR's actual effects on financial costs In the context of Vietnam, the authors incorporate additional control variables such as company size, age, financial leverage (Lev), return on assets (ROA), and ownership ratio of the largest shareholder to further elucidate the relationship between GSR implementation and financial costs.
Choosing the appropriate regression method:
Accordingly, the sequence and explanation of the selection of models are explained as follows:
Table 4.4: Regression results of model (1) according to OLS, FEM, REM
Dependent variable COD COD COD
(Source: Analysis results of the authors from STATA software)
The results show a difference between the methods Therefore, to conclude which method should be used, the authors have conducted the following 2 tests:
Step 1: Use the F-test to choose the result between the FEM or OLS method The F-test result with p-value = ().()()()