Environmental Performance of Manufacturing Firms in Vietnam Characteristics and Determinants of Success

■2012 JSPS Asian CORE Program, Nagoya University and VNU University of Economics and Business

Environmental Performance of Manufacturing Firms in Vietnam:
Characteristics and Determinants of Success

VNU University of Economics and Business

Pham Quynh Anh *

Abstract: The paper identifies and analyses characteristics, determinants of pollution abatement activities of
manufacturing firm in Vietnam to meet environmental protection requirements. Logistic models are used for a
number of newest sub-datasets of enterprise annual survey conducted by Vietnam General Statistic Office,
covering approximate 5000 manufacturing firm in Vietnam in the year 2009. The study reveals that small- and
medium-sized enterprises (SMEs) or private-owned enterprises (non-SOEs) have made greater efforts to reduce
emission as compared to the large ones (LEs) or state-owned, foreign investment enterprises (SOEs, FIEs)
respectively. However the former sector has been less successful than the latter in satisfying environment
standards. Environmental system management, firm size, environmental staffs, the foreign firms are the driving
forces for firm becoming the government environmentally or ISO 14001 certified. In contracts, private local
ownership, fluid and solid emission volume has significantly negative sign of coefficient. Firm’s pollution
abatement expenditure, in both absolute and relative terms, is not the important factors for its pollution treatment
success.
Key words: Firm’s environmental performance, environmental effort, environment success, emission volume,
pollution abatement, government and ISO 14001 certification.

*Faculty of Development Economics, VNU University of Economics and Business

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1. Introduction. Following the Rio de Janeiro
Earth Summit 1992, environment protection has

evolved from consciousness to comprehensive
action programs at both macro- and micro – level,
across
virtually
all
industrialized
and
industrializing countries. As a result, the
considerable number of studies on environmental
responsiveness of firms has been increasing,
especially in developed economies. Beyond the
works on determinants of firm’s environmental
responsiveness (Knudsen and Madsen 2001, Hojat
et al. 2010), many studies focus on relatively
different
themes
reflecfactors
affecting
environmental protection movements in the context
of each group of country (Lin, 2011). While
pollution prevention based on technology
innovation and product stewardship is emerging
research topic
in developed economies
(Brunnermeier and Cohen 2003, Lefebrve and
Talbot 2003, Filed 2006), pollution control with
end-of-pie
technology
and
environmental

regulation compliance is the prominent subject in
developing economies where there are prevalent
limitations of firm financial capability, government
legal framework and society’s environmental
protection awareness (Dasgupta et al 2001, RuizTagle 2006).
Industrialization has been accelerated in Vietnam
since the early 1990s with the waves of foreign
investment and a latter explosion of newly established
private firms. Accordingly, pollution has been being
serious and there merely have been a small number of
management reports on manufacturing firms’
attempts in pollution abatement in order to meet
domestic and international environmental standards.
However, studies on these activities using economics
perspectives and econometrics tools to analyze trends,
characteristics of pollution treatment and the
determinants of environmental success are sparse.
This paper therefore attempts to contributes to fill this
knowledge gap, shedding the light on three
environmental issues of manufacturing firm in
Vietnam.

Pollution abatement financial and personal
efforts o by firm size and ownership
The successful degree of pollution control
The distinctive factors influencing pollution
abatement success.
The paper is organized as the following. The second
part presents the conceptual framework, data and
method of the research. The next part highlights the

features of pollution abatement attempts of
manufacturing firms by firm sizes and ownerships.
The last part is devoted to explain why environmental
protection efforts achieve varying results and give
policy implications.
2. Conceptual framework, data and method
2.1 Conceptual framework
Firm environmental performance captures diverse
environmental protection actions of firms despite
somewhat differences among scholars. In this study
the concept is defined as firm’s all activities abating
pollution caused by its production and the
corresponding results with respect to meeting
domestic of international environmental protection
standards.
Firm environmental effort new sub-concept
introduced in this paper to term firm’s environmental
responsiveness in the context of developing countries,
comprises two major types of firm environmental
protection activities. The first is financial effort,
measured by ratio of firm’s total expenditure on
pollution treatment equipments and environmental
regular cost over total capital. The second component
is personal effort, measured by ratio of firm’s number
of environmental staff over total number of employee.
2.2 Data and methods
Data: The newest data of the environmental session
in the annual enterprise survey conducted by Vietnam
General Statistical Office (GSO) since 2000 with both
technical and financial assistance of World Ban. It

covers around 5000 manufacturing firms in Vietnam,
accounting for 15 percent of the population in the
year 2009. The surveyed firms were selected
proportionally to all three sectors and fifteen types of
firm ownership by classified of GSO, to all twenty
two two-digit manufacturing industries classified by

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UNIDO, revision 3, and to all 64 provinces of
OWN: Firm ownership, includes three sectors. SOE:
Vietnam. Such selection excludes the bias of results
State-owned enterprise; NSOE: Non-state owned
from comparative analysis by firm size and
enterprise; FIE: Foreign investment enterprise
ownership caused by the possible impact of industry
IND: Industry in which firm operates, includes three
or province characteristics. Econometrics models
types. BASIND: Basic-good industry; INTERIND:
merely employ 2317 observations or firms with
Intermediate-good industry; CAPIND: Capital-good
positive environmental expenditure.
industry
Method: The comparative analysis method is used to
All ownership- and industry- relating variables are
identify the features of pollution abatement and
dummy ones, being 1 if firm belongs statedcorresponding results by different firm sizes and
ownership or industry ; being 0 otherwise
ownerships. The indicators and measurements of firm

Emission types; measured by the volume of
size and ownerships are used according to Vietnam
emission
government decisions, enabling research findings and
FLUEMIT: Fluid ; SMOEMIT: Smoke; SOLEMIT: Solid
policy implications to be more likely informed and
Finance factors:
selected by policy makers and deciders.
FINANEF: Financial effort = (pollution abatement
Regression models are used to investigate factors
equipment expenditure + environmental regular
affecting of environment protections success and their
expenditure)/total firm capital
impacts.
TOECOST: Total environmental protection cost =
GOVCER = f (SIZE, OWN, IND, EMIT, FINANEF,
pollution abatement equipment expenditure +
TOECOST, EMS, ESTAFF)
environmental regular expenditure
ISOCERT = f(SIZE, OWN, IND, EMIT, FINANEF,
Environmental management:
TOECOST, EMS, ESTAFF,GOVCERT)
EMS: dummy variable; being 1 if environmental
GOVCERT is dummy one, being 1 if firm is
management system presents in firm, being 0
government environment certified; being 0 otherwise;
otherwise
ISOCERT is dummy one, being 1 if firm is ISO
ESTAFF: dummy variable, being 1 if there is
14001certified; being 0 otherwise

environmental staff in firm; being 0 otherwise
Firm characteristics
SIZE1: Firm size measured by number of employee,
SIZE2: measured by capital
3.1 Environmental performance of manufacturing firms in Vietnam
Table1. Mean environmental efforts and result by firm ownership, 2009
No
EP
EP
EP
ISO
Firm ownership
of
cost/
staff/
CertiCertifirm
capital
labor
ficate
ficate
(%)
(%)
Central SOEs
19
0.016
0.01
52.6
21.1
Local SOEs
26

0.01
0.006
61.5
11.5
Central limited SOEs
19
0.008
0.005
68.4
21.1
Local limited SOEs
13
0.027
0.008
76.9
7.69
Limited with >50% state capital
115
0.018
0.009
58.3
17.4
SOEs
192
0.016
0.008
60.4
16.7
Collective
35

0.019
0.007
22.9
2.86
Private
481
0.033
0.019
25.8
3.12
Private-limited
1803
0.011
0.015
25.7
4.83
Joint-stock
490
0.016
0.014
44.1
11.8
Joint-stock with state capital
181
0.024
0.014
54.7
13.3
Non-SOEs
2992

0.016
0.015
30.2
6.18

3


!00% Foreign
Joint-venture with SOEs
Joint-venture with local private
FIEs
Total

775
75
57
907
4091

0.011
0.019
0.013
0.012
0.015

0.015
0.01
0.019
0.015

0.015

55.5
52
54.4
55.1
37.3

16.1
26.7
14
16.9
9.04

Source: Author’s calculation from GSO survey
3.1.1 Environment protection performance by ownership
The table 1 presents pollution abatement expenditure
ratios and corresponding results of manufacturing firm
by ownerships in the year 2009, revealing two first
striking features.
First, there emerged significant differentials of relative
pollution abatement expenditures and results between
ownership sectors and even within a sector, especially
with respect to obtaining ISO 14001 certificate. Mean
ratio of environmental staff over total employee
(personal effort) for non-SOEs sector was nearly double
for SOEs and FIEs. In contrast, mean environmental
expenditure over total capital ratio (financial effort) of
FIEs was merely about three-quarter all domestic firm
types. At firm-level, given firm’s limited capital on the

average, the environmental effort gap is dramatically
widened up to four-times in financial term between the
private and the central limited SOEs and even nearly
nine times in term of ISO certification between
collective and FIEs joint-venture with SOEs.
In addition, the nearly three-hundred-percentage
disparity of relative financial investment emerged within
SOEs sector between local limited and local traditional,
and within non-SOEs between private limited and
private. In respect to environmental protection result, in
the non-SOEs sector, the number of ISO certifications
awarded to the joint-stock with state capital was
approximately three times as many as the collective and
the private.
The second interesting feature of environmental
performance of manufacturing firms is the markedly
contrasting magnitudes between financial or personal
efforts and the success degrees when comparing nonSOEs to SOEs or FIEs. Of three ownership sectors, nonSOEs’ personal and financial ratios emerged as the
highest, nevertheless its percentages of firms becoming
governmental or ISO 14001 certified turned out to be the

lowest. Of firm ownerships, such a contradictory investresult was the largest between the collective and central
SOEs limited, with the former indicating two-times
higher than the latter for financial ratio plus a larger
personal ratio, but nearly eight-time and three-time–
lower number of 14001 ISO and government
certification correspondingly. Accordingly, it is evident
that being limited by financial capability, non-SOEs in
general and the collective and private in particular stood
as the least-clean despite their largest environmental

expenditure ratio across sectors and firm ownerships. In
contrast, lesser environmental investment but more
success were found for SOEs, FIEs at sector level and
the central limited SOEs, joint-venture with state capital,
joint-stock with state capital at firm-level. It should be
emphasized that with a very low ISO certificate rate of
only 2.8%, compared to 22.9 % recognized by
Vietnamese government, non-SOEs firms were far from
meeting international environment standards.
The above findings suggest the considerable impact of
ownership types on environment performance in general
and the positive role of all state-relating firm ownerships
for success in particular. Also, these results raise question
why the degrees of firm’s environmental effort have
been not consistent with the success?
3.1.2 Environment performance of firm by size
The environmental performance features of different
firm sizes, reported in the table 1, are relatively similar to
those analyzed from table 2 with various financial and
personal investments of firm sizes and the opposite
relative investment-success of small and medium
enterprises (SMEs) as compared to large enterprises.
Both financial and personal pollution abatement efforts
decreased while the success percentage increased with
firm size. These trends are logical and consistent with
analysis by firm ownership since SMEs account for a
substantially larger portion of non-SOEs than that of

4

SOE and FIEs, about 95 % and over 85 %

correspondingly.

Table2. Mean protection environment expenditure ratio and result by firm size, 2009
Firm size
(No of labor)

No
of
firm

PA
cost/
capital

<=10
330
0.017
11-200
2602
0.015
201-300
313
0.015
SMEs
3245
0.016
301-1000

577
0.015
1001-5000
244
0.012
>5000
25
0.008
Large
firm
846
0.014
Total
4091
0.015
Source: Author’s calculation from GSO survey
The degree of such a contradictory between firm
sizes was much sharper than between firm
ownerships by both success indicators. The largest
enterprises’ average financial effort government as
well as ISO environmental certificate was
respectively nearly 6 times and even up
approximately 20 times higher than that of the
latter. These results strongly suggest that firm size
affected achieving clean production even more
substantially than the degree of environmental
investment and especially on firm’s successful
scale of pollution treatment
4. Explanations for environmental protection
success of manufacturing firms

4.1 The abatement expenditure-emission volume
relationship approach
It is generally supposed that firm’ emission volume
is proportionally increased with the production
scale or its size, therefore it is not necessary for
firms to over-expend to treat their production
pollution. In other words, a firm’ environmental
abatement cost extent should be consistently
increased with its size or production, disposal scale.
But why do SMEs and non-SOEs had the highest
environmental expenditure rate but lower
successful degree?. We introduce here the first

Envi.
staff/
labor
0.03
0.015
0.008
0.017
0.005
0.003
0.001

Envi.
Certificate
(%)
11.8
31.3
53

31.4
56.7
66.4
72

ISO
Certificate
(%)
3.03
5.5
11.5
5.82
16.6
28.7
60

0.004
0.01

59.9
37.3

21.4
9

explanation from the view of emission-abatement
expenditure relationship.
As it occurred in many developing countries, in
Vietnam virtually all pollution abating equipments
have to be imported from the advanced highincome, therefore incur a large expenditure relative

to average financial capacity of SMEs and a higher
environmental cost-total capital ratio compared to
large enterprises. Nevertheless, the matter here is
that such investment is still not sufficiently large,
proportional to their emission volume.
To support numerically the above arguments, we
estimate and consequently compare the ratio of mean
total emission treatment cost of each firm sizes or
ownership to the ratio of mean volume of each
emission type since it is impossible to aggregate fluid,
air and solid emission in to a figure with a common
measurement. These rates are presented in Table 3 with
the SMEs – LEs ratio by financial investment being
higher than that by solid disposal volume, 4.8 %
against 1.86%, but lower by fluid or smoke rate (7.85
%, 5.2 %). In addition absolute magnitude of the
former emission type was substantially smaller than
each later. In other words, average SMEs-LEs rate in
term of environmental financial effort was lower than
that in term of emission volume, explaining why SMEs

5


were less successful in pollution treatment despite their
greater attempt relative to financial capability. Similar
contradictory results and correspondent explanation are

appropriate in the comparative cases of non-SOEs and
SOEs, ex-small and ex-large enterprises.

Table3. The mean pollution abatement cost and emission volume by firm types
Mean
Pollution
abatement expenditure
Emission volume
PA exp. (million dongs)
Fluid (m3)
Smoke (m3)
Solid (ton)

PA exp. (million dongs)
Fluid (m3)
Smoke (m3)
Solid (to)

PA exp. (million dongs)
Fluid (m3)
Smoke (m3)
Solid (ton)

PA exp.(million dongs)
Fluid (m3)
Smoke (m3)
Hard (ton)

Firm type
(1)
(2)
SM

Large
425
8862
12071
153854
319051
6133794
272.6
14695
ExEx-Small Large
4.36
2330
104.9
113955
23.4
5555
41
603.7
nonSOEs
SOEs
403
14785
5680
662409
590754
1.18
572
4009.5
nonSOEs
FIEs

403
6780.22
5680
60959
590754
5074719
572.7
12304

Rate
(1)/(2)
(%)
4.8
7.85
5.2
1.86

0.19
0.09
0.42
6.8

2.73
0.86
5.01
14.3

5.95
9.32
11.6

4.65

Source: Author’s calculation from GSO survey
4.2 Regression approach
Table 4 reports the regression results of factors
affecting firm’s success in pollution treatment,
indicated by receiving environmental protection
certifications or ISO 14001 certificate .
Firm characteristics have considerable impacts on

its environmental success. Firm size measured by
number of employee, has little effect despite its
statistic significance at 5 % for ISO obtaining.
However, with capital measurement, firm size
affects strongly obtaining both certificates and
significantly statistical for ISO 14001 award.

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Table4. Logistic regression on determinants of firm’s pollution control success
Dependent
Independent
Variable
FIRMSIZE1
FIRMSIZE2
SOE
NSOE
FIE
BASIND

INTERIND
CAPIND
FLUEMIT
SMOEMIT
SOLIEMIT
FINANEFF
TOECOST
EMS
ESTAFF
GOVCERT
Observations
Wald Chi square
Pro> Chi square
Log likelihood

Variable
Being Environmentally Certified
Government
ISO 14001
Coefficients
Coefficients
(robust-Z)
(robust -Z)
(1)
(2)
(1)
(2)
0.0003*
0.0003*
7.92

5.565**
0.51*
0.257
- 0.768***
-0.886***
0.725***
0.796***
-0.262
-0.480
0.073
-0.195
0.185
0.803**
2.68
-6.364**
-3.81
2.54
-1.39***
3.71
1.98
-2.046
-9.02
-2.56
1.80***
1.188***
1.315***
0.834**
1.584***
2236
639.22

0
-943.15849

Note: Level of significance *10%;**5%;***1%
Firm ownership types have relatively strong
influence on environmental result with similar
positive significant impact from the foreignowned on firm meeting domestic as well as
international standards. This supports arguments
that foreign firms generally bring to the host
country not only more modern technology,
management skill but also environmental
responsibility culture. The state ownership helps
firm more likely be familiar and comply to
government environmental regulations but its
positive impact on meeting international standard
is not significant. In contrast to FIEs, collective
and private ownership (non-SOEs) strongly and
significantly affect firm’s success in pollution
abatements. These results, combining with those
identified in the previous session, imply that in

2236
202.06
0
-324.50191
spite of their considerable efforts, non-SOEs have
to invest more effectively on pollution treatment
to the extent that absolute abatement expenditure
is adequately large relative to firms’ emission
volume.

Firm ownership types have relatively strong
influence on environmental result with similar
positive significant impact from the foreignowned on firm meeting domestic as well as
international standards. This supports arguments
that foreign firms generally bring to the host
country not only more modern technology,
management skill but also environmental
responsibility culture. The state ownership helps
firm more likely be familiar and comply to
government environmental regulations but its
positive impact on meeting international standard

7


is not significant. In contrast to FIEs, collective
and private ownership (non-SOEs) strongly and
significantly affect firm’s success in pollution
abatements. These results, combining with those
identified in the previous session, imply that in
spite of their considerable efforts, non-SOEs have
to invest more effectively on pollution treatment
to the extent that absolute abatement expenditure
is adequately large relative to firms’ emission
volume.
Industry in which firm operates has insignificant
statistical coefficient on environmental success by
both indicators, beyond that of capital-good
industry on meeting ISO14001 requirements,
The emission magnitudes in either form has the

largest and negative effects on firm’s pollution
treatment success except two relationships, fluid
and government certificate or smoke emission and
ISO certification correspondingly. But the positive
signs of coefficients in these cases are not
significant. Solid disposal volume is found to be
the largest and the most highly significant
constraint for manufacturing firms to become
environmentally
governmental
certified.
Similarly, fluid emission extent comes out clearly
to be the highest barrier for being ISO14001
certified. In other words, the manufacturing firms
in Vietnam are still limited in treatment of two
these emission types as required correspondingly
by Vietnam environmental standards and ISO
14001 criterion.
Contrary to the normal thinking both relative
financial investment has not only significant
impact on firm’s insignificant pollution treatment
success. The environmental expenditure-capital
rate has only positive impact relationship with
government certificate but this factor and even
total or absolute abatement cost has negative
correlations and with firm’s environmental
success by both indicators. Such coefficients helps
majorly explain the opposition between pollution
treating success and relative financial effort of
firms when comparing non-SOEs and SOEs,

SMEs and LEs as indicated in the previous
session. These results also imply that the spending
way is more important than the amount of
expenditure in achieving pollution treatment
target, especially on the average firm’s absolute
financial investment is still considerably low as
compared to that in developed economies.
The findings on environmental management
system supports to the above financial
implications. EMS is found to be the most
important explanatory variable for achieving
pollution control success by both certification
indicators. Both dummy managerial variables, the
presence of environmental staffs or environmental
management system (EMS) have large, positive
and distinctive on firm satisfying environmental
protection domestic and international standards.
The strong, positive effect of obtaining
environmental government on receiving ISO
14001 certificate imply that meeting pollution
abatement domestic requirements is good
consequent preparation for manufacturing firms to
pursue and satisfy higher environmental criterion
issued by international organizations.
In addition to adding knowledge of pollution
abatement characteristics of various firm types by
size and by ownership in the case of Vietnam, our
study’s finding share similarities with the previous
studies on the determinants of firm environmental

success. These comprise the strongest impact of
environmental management system, the driving
force of firm size, foreign firms, the cleaner
public ownership compared to the local private,
the support from satisfying local government
regulation
for
meeting
international
environmental standard and the insignificant
effect from features of industry or firm’s
manufacturing technology. However, despite an
emphasis of the emission volume as one of the
main barrier (the fluid for FIEs and the solid one
for SOEs), contrary to normal thinking and the
results form study by Earnhart and Lizal (2007),
one of our study results questions the driving role

8


of financial investment for firm’s pollution control
achievements.
This
therefore
strongly
recommends the further studies on this important
and disputable topic.
5. Conclusion
Manufacturing firms in Vietnam have made

considerable attempts to control pollution given
their small financial resource compared to
counterparts in the world, even those in South
East Asian regional countries. In term of financial
effort (abatement cost/total capital) or personal
effort (environmental staff/total labor), the greater
was SMEs and non-SOEs rather than large
enterprises and SOEs or FIEs. Nonetheless, with
respect to environmental successes, the results are
contrasting, with a substantially larger number of
LEs, SOEs, FIEs becoming domestically or
internationally environmental certified or
achieving both standard levels .
The contradictory features between environmental
protection efforts and results are firstly explained
by the fact that in spite of a larger abatement
expenditure relative to capital of SMEs or private
local firm, it still not sufficiently large to the
emission magnitude released from their
production. Solid, fluid emission volume, private
ownership affects negatively and significantly on
firm being verified environmentally responsive
while environmental management factors, either
being personal or organization, are the positive
and strong determinants of achieving government
as well as ISO certification. Reaching domestic
environmental protection levels is markedly
enables firm to achieve that by international
standards. The amount of environmental
expenditure either in relative or absolute term is

less important than the managerial method and
human factor for success in pollution control of
manufacturing firms in Vietnam whereas nonSOEs or small enterprises’ abatement spending
needs to increase proportionally to their emission
volume.

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