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Specialists presents solutions for expanding ESG’s horizons

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ESG - Environmental, social and corporate governance
ESG – Environmental, social and corporate governance

Sustainable practices required by international markets and consumers point to a need for change in the culture of organizations. An investment potential of more than US$ 1 trillion places Brazil in front of challenges studied by universities and research centers.

 

If investing in the adoption of ESG practices could still be considered superfluous or less relevant until just before the covid-19 Pandemic, the indications for the coming years are that changing this mindset will be an imperative for organizations. The Inter-American Development Bank (IDB) assesses that Brazil has an estimated green investment potential of US$ 1.3 trillion in the sectors of energy, transport, construction, waste management and industrial energy efficiency. And to capture these resources, the country, and its organizations, must adopt practices that cover issues such as social inequality, gender equity, climate change and biodiversity preservation, among others.

The forecasts indicate a scenario to expand ESG. The Global Sustainable Investment Alliance, an entity that analyzes the so-called “responsible investments”, estimates that this type of expenditure has already reached US$31 trillion, which corresponds to 36% of the world’s total financial assets. In 2021, the credit market for sustainable debt surpassed US$ 1 trillion in accumulated funding. Aiming sustainable investments, in 2020, B³, the Brazilian Stock Exchange launched a set of sustainability indexes that range from corporate governance actions to efficient carbon in organizations. The obligation of the companies that make up this fund is to be aligned with the United Nations Global Pact for sustainable development by 2030.

If the adoption of ESG practices emerges as the prosperous present and future for organizations, their speed of implementation is directly linked to economic gains. “In times when competition is fiercer, managers pay less attention to ESG practices. When there is not so much demand, they are in a calmer period, with less demanding competition, that surplus money he invests in the practice of ESG”, explains Robert Iquiapaza, professor of the Department of Economic Sciences at the Federal University of Minas Gerais  (UFMG). The conclusions are in a survey carried out in emerging countries, such as Brazil, which is still being evaluated by the professor.

One of the hypotheses for this still irregular investment is the different profile of each market and the purposes of the companies. According to Iquiapaza, some companies and markets are more “altruistic” and others embrace the idea of ​​having ESG as a “differential” from their competitors.

“If it were strategic, the company should not reduce expenses with this (ESG), it should, on the contrary, invest more. But what was found in the study is that organizations forget these practices. It seems that there is a more opportunistic idea still prevailing in the Brazilian market. The surveys here are still not finding this positive relationship between better ESG indicators and better performance”, says Robert Iquiapaza. But the path can become tortuous for companies that do not adopt these sustainable perspectives, especially those that aim to raise funds from abroad. A survey released by consulting firm PwC, in 2021, points out that “77% of institutional investors said they plan to stop buying non-ESG products in the next two years.” The same survey shows that, in Brazil, “ESG funds raised R$ 2.5 billion in 2020 – more than a half of the amount came from funds created in the last 12 months”.

As ESG practices encompass many perspectives within and outside organizations, there is a growing demand for multifaceted professionals from different areas of knowledge. Given this need, universities and researches entities can become useful to insert or improve ESG projects. Organizations that do not yet adopt sustainability as a guideline have ample terrain to acquire knowledge, with the university as a partner. This is the assessment of professor in Environmental Management at UFMG, Raoni Rajão. He already works on environmental projects such as SeloVerde, implemented in the State of Pará, which provides data monitoring for agribusiness. “I believe that there is an interest from different companies, business groups, coalitions, banks, investor groups, in Brazil and abroad,” he says. Among the sectors that have robust data and knowledge to be used, Professor Rajão cites subjects in “agriculture, mining”, among others.

ESG and brands

Although the concept of ESG is still strongly linked to sustainability and natural resources, there are other dimensions – inequality, gender equity, inclusion of the LGBTQIA+ community – that are relevant for a positive assessment of an organization. From the perspective of analyzing the advertising activity in Brazil at the beginning of the 20th century, Professor Carlos Magno Mendonça, a Social Communications specialist, explains how it was based on three axes that are now required by larger scale companies. He still sees “a gulf” between adoption of ESG concepts and companies. “The advertising activity was based on three axes, informing the population, educating them about the usefulness of the products and, in the end, making comparisons. […] The inform-educate-seduce tripod remains. Only it gains other layers. People are prepared and are used to consuming fast, and today the products seduce not only for their technical and aesthetic aspects, but also for their behavior”, stresses Carlos Magno. “They (organizations) will have to have more and more effective commitments and not just advertise this commitment”, sentences the researcher.

One of the cases mentioned by him is that of the mining company Vale, owner of Samarco and controlled by the Australian BHP Billiton. Vale needed to promote in its social dimension of the brand an idea of ​​respect and reparation for communities affected by one of its environmental disasters that killed at least 270 people, including workers and residents of cities in the State of Minas Gerais. In its advertising, aired on radios, newspapers and TVs, the company started to carry out campaigns showing concerns with the social aspects of its operations. It is an attempt to show that there is concern for its stakeholders and the production chain linked to it. “It (Vale) says that not only is the company concerned with sustainability, but that it demands it from its partners. Once it does that, the company also says that it explores, is involved in environmental and death crimes and only then develops a part of the ESG concept”, he quotes. “There is still a gulf between ESG concepts and companies,” he says.

According to specialists heard for this article in addition to mining, Brazil should pay special attention to the environmental sector. In view of the increased numbers of fires recorded in the years 2019 and 2020, the country was once again asked about international preservation pacts.

What should put on alert organizations and governments to include ESG as a permanent culture is the change in the consumer profile and their concern not only to choose, but to reject products, brands and organizations that do not have sustainability as a pillar in their businessess. A survey carried out by the monitoring company Stilingue in partnership with Rede Brasil Pacto Global showed that both Millennials and Generation Z members have a strong interest in sustainable investments.

“In recent years, 78% and 84% of these generations, respectively, declared they opted for this type of investment”, sustains the consultancy. It is not only the world who is giving us signals that ESG is important, the consumers are showing their discontent with those who are not paying attention to their role to change society.