Vietnam’s Productivity Imperative: Why TFP Is Now the Decisive Factor for Economic Transition
July 16, 2025
Circular Gains: How Resource Efficiency Drives SME Profitability in Vietnam
July 22, 2025Vietnamese SMEs often assume the circular economy is out of reach—too costly, too complex, or simply designed for big corporations. In reality, these misconceptions are holding them back from cost savings, brand differentiation, and long-term competitiveness. This article unpacks the real barriers and opportunities, with insights from Vietnam’s national strategy and community-led initiatives.
Misconceptions That Limit SME Potential
Circular economy models are not new in Vietnam, but they remain misunderstood by most small and medium-sized enterprises. In conversations with local manufacturers, packaging firms, and traders, three common myths emerge:
- It’s only for multinationals.
- It requires major upfront capital.
- There are no clear incentives.
These beliefs persist despite mounting evidence to the contrary. Visual campaigns in the recent national report (“Báo cáo Kinh tế Tuần hoàn Thế giới—Nhìn từ Việt Nam 2025”) clearly tackle these issues head-on. One prominent panel reads: “Nó chỉ cho các tập đoàn lớn” (“It’s only for big corporates”), accompanied by SME testimonials proving otherwise.
One Vietnamese textile supplier started by recycling offcuts into new yarns with help from a local incubator. The investment was modest, but the returns were tangible: 12% savings in raw material costs and improved export appeal.
Policy Is Now on Their Side
Vietnam’s National Circular Economy Action Plan 2025–2030 names SME participation as a top priority. Unlike past environmental frameworks that focused heavily on state-owned or large enterprises, the current strategy earmarks pilot funding, capacity-building, and incentive schemes for SMEs.
International partners like UNDP, ADB, and GXS are actively involved in this transition. Their combined programs focus on four pillars:
- Digital access to circular economy knowledge
- Industry-specific playbooks (textiles, food & beverage, plastics)
- Linkages to ESG finance
- Legal and compliance training
Community platforms such as Kinhtetuanhoan.org and CircularEconomy.asia offer Vietnamese-language guides, downloadable checklists, and video case studies.
These platforms matter. SMEs don’t just need policies; they need frameworks they can act on without an ESG consultant. Government efforts like Resolution 687/QD-TTg (2022) now make circular business registration easier—a key step toward legal clarity.
Circular Innovation Is Already Happening
Vietnam’s SME sector accounts for more than 90% of enterprise activity. It’s also the ecosystem where innovation is happening fastest—quietly, and often below the radar.
A small coffee chain in Da Lat switched from plastic packaging to compostable paper with local suppliers, cutting waste disposal costs by 60% and increasing foot traffic from eco-conscious tourists.
An agricultural co-op in Long An introduced a water recycling loop for vegetable washing, reducing water bills by 30% and drawing attention from an EU buyer seeking sustainable sourcing.
These aren’t pilot projects funded by foreign donors. They are business-led shifts driven by competitiveness. With circular adoption, the value proposition is often immediate: cost savings, compliance edge, brand enhancement.
That edge is growing. Exporters report that circular credentials now appear in due diligence from Korean, Japanese, and EU buyers. The opportunity is no longer optional.
Community-Led Tools Lower the Barrier
Knowledge friction—not money—is often the real barrier. Many SMEs don’t know where to start, who to ask, or how to judge the ROI.
Vietnam’s ecosystem is changing that. CircularEconomy.asia—run by a public-private working group—connects SMEs to practical tools: business model templates, supplier directories, and sector benchmarks.
The GXS Circular SME Toolkit, piloted in Binh Duong and Hanoi, simplifies lifecycle thinking into three steps:
- Identify the waste or inefficiency.
- Map what can be reused, recycled, or re-sold.
- Test on one SKU or production line.
Within three months, one food-processing SME reduced input waste by 18%, cut energy use by 10%, and secured a partnership with a zero-waste e-commerce startup.
This isn’t theory. With the right tools, small teams can shift behavior in weeks—not years.
First Movers Gain a Strategic Edge
In markets like Japan and the EU, sustainable procurement is now standard. In ASEAN, circular compliance will soon shape cross-border investment and supplier networks.
Vietnamese SMEs that move early gain visibility, credibility, and access to financing. Investors increasingly seek businesses with traceable resource use and resilient supply models. Banks like BIDV and TPBank have begun to bundle green SME loans with advisory services.
There is also a reputational halo. One Ho Chi Minh-based refill cosmetics startup has turned its refill model into national PR and partnered with two malls to open kiosks. The brand didn’t just save plastic—it gained share.
This is what circular transition looks like at SME scale: leaner inputs, stronger identity, investor interest.
Looking Ahead: From Awareness to Execution
Vietnam’s circular economy strategy is no longer theoretical. The policies exist. The platforms are live. The case studies are building.
What SMEs need now is execution support: easier onboarding, simplified metrics, and access to peers.
At Lotus Venture, we work with growing businesses that want to transform their operations, align with future markets, and lead rather than follow.
Circular economy is no longer a global trend. It’s a Vietnamese SME advantage—ready for scale.
