HCM City (VNS/VNA) - Vietnamese enterprises need to improve theirsocial and environmental performance to secure their position in global supplychains, a seminar heard in Ho Chi Minh City last week.

Nguyen Ngoc Sang, project manager of the German Business Incubator at theDelegation of German Industry and Commerce in Vietnam (AHK Vietnam), said inrecent years Vietnam had been a popular investment destination for manycountries, especially Germany.

AHK Vietnam was receiving increasing requests from German companies to findsuppliers in Vietnam, he said while speaking at the seminar on enhancingVietnamese companies’ competitiveness in global supply chains throughcompliance with the German Supply Chain Due Diligence Act.

With its geographical location, Vietnam is considered the gateway to SoutheastAsia, a rapidly growing and dynamic region, according to Sang.

It is attractive to investors thanks to its low labour costs, high labourcompliance, strong growth for many years, and open mechanism for attractinginvestment.

It has signed many trade deals, including the EU-Vietnam Free Trade Agreement,which gets much attention from European investors, including German, andenterprises seeking to diversify their supply chains also prefer the country.

According to Nguyen Tuan, deputy director of the Investment and Trade PromotionCentre of HCM City (ITPC), said trade and investment ties between Vietnam andthe EU, especially Germany, have seen robust growth in recent years.

Germany is Vietnam's largest trading partner in Europe, accounting for morethan 19 per cent of its exports and acting as the gateway for Vietnamese goodsto enter other European markets.

While productivity and quality standards remain key factors, internationalbusiness partners are increasingly looking at social and environmentalconditions when choosing suppliers.

To ensure exports to demanding markets, Vietnamese enterprises must comply withstringent regulations like the German Supply Chain Due Diligence Act (LkSG).

Lanh Huyen Nhu, project coordinator for Sustainable and Climate ResilientSupply Chains at AHK Vietnam, said the act, which came into effect in Januarythis year, sought among other things to prevent child and forced labour and bansubstances that are hazardous to people and the environment.

"The law requires German companies to establish appropriate and effectiverisk management for their supply chains and integrate it into all relevantbusiness processes," she said.

Companies in Vietnam could be indirectly affected by these regulations if theyare part of a supply chain of a German company.

According to experts, while due diligence in supply chains and the resultingobligations are not new, these standards are becoming even more relevant,requiring more initiatives from businesses.

Understanding and putting these requirements into practice would lower risksand strengthen their competitiveness in the global supply chain, they said.

The seminar was held by ITPC and AHK Vietnam./.