“Who cares wins”. This was the title of the emblematic UN report that gave rise, in 2005, to the concept of ESG, Environmental, Social and Corporate Governance. At the time, 20 financial entities from nine countries, including Brazil, met to establish guidelines on major global economic challenges. The result: factors such as environmental and social sustainability, asset management and governance have become prerequisites for investments in companies worldwide.
And this is exactly what’s been happening, as Dasein’s CEO Adriana Prates points out. “ESG is gaining more and more strength in the international stock market (led by the North American Nasdaq) and in the world’s leading companies. More than 80% of companies already prioritize sustainable development in their planning and actions, a 20% growth compared to 2019. And 7 out of 10 companies already evaluate their senior employees based on governance and sustainability criteria”, she says. According to her, these are numbers determined in February this year by the first report on the scenario of ESG, titled “Global Impact at Scale: Corporate Action on ESG Issues and Social Investments 2020”, which analyzed about 200 companies from 23 countries with a combined revenue of US$ 8 billion.
Adriana Prates – CEO of Dasein and AESC advisor for Latin America.
The CEO explains that, in practice, there is a growing use of ESG by investors to assess the maturity of organizations and whether they are more or less exposed to risks. “This is already a reality outside Brazil, and its presence in national companies will be a matter of time. But I must caution – ESG cannot be implemented as an act of philanthropy. It must be understood for what it really is: a powerful indicator of development goals.”
Even though there’s still a long road ahead for most Brazilian companies, Adriana points out that many organizations are already reaping the fruits of ESG, as is the case of Magazine Luiza. With innovative initiatives around diversity, social inclusion and technology, the company shows that it is not only concerned with profit, but also with the people it impacts and the society in which it operates. “Luiza Trajano herself recently said that her clients buy more and more each day because of the company’s attitudes, not only because of the product. More than just for providing a good reputation, this has been an essential ingredient for increasing the company’s market value – which is indeed much higher today. Another point stressed by her that I consider essential: the clarity of mind that, to achieve this result, the company had to reduce its profit target for a significant period of time.”
For Maria Flávia Bastos, professor at Fundação Dom Cabral, writer and lecturer, many companies see – and will continue to see – that the combination of profit and social awareness only brings advantages. “But I don’t think we are that close to experiencing this in Brazil. Unfortunately, many companies only act out of conformity, either because of a lack of quality information or an inability to see social value as an opportunity for the business. ESG will soon become the norm. Companies that do not invest in ESG-oriented practices will have difficulty with new investments, suppliers and customers, and even with employees since the workforce formed by millennials is already more aware about the importance of social and environmental issues.”
From individualism towards collective benefit
Adriana Prates emphasizes that major transformations are initiated by raising awareness at the top, but for this to happen, it is first necessary that the main “individuals/decision makers” understand, in detail, the entire path that will be taken, including costs and benefits. “Change must be genuine. Commitments made must be supported by targets, deadlines, new guidelines for processes. If this is not the case, our ideas will never go beyond conversation. And I emphasize the importance of the entire board being aware that the company is
Maria Flávia Bastos is a writer, lecturer and professor at Fundação Dom Cabral.
making an investment and, therefore, the financial outcomes will suffer for a period.
Maria Flávia Bastos also points out that it is not enough for leaders to think about ESG without effective support from their management and board. “Sustainability needs to be at the center of the company’s discussions and be treated with the same importance as innovation processes in products and services. So, with a company that has truly aligned ESG to its strategies, we can have leadership that will be able to start a process of change, begining with their routine, and in practices that are not so difficult to implement.”
“I’ll use the wonderful definition by Carlo Pereira, executive director of the UN Global Compact Network Brazil, when he says that ‘ESG is not an evolution of corporate sustainability, but corporate sustainability itself’. So, if you don’t know about ESG, try to learn more about it and think about the practices to be implemented as soon as possible. The future is no longer so distant. ESG is urgent and all based on new practices that guarantee an equitable and sustainable future for the planet.
Examples from the top
According to Paulo Misk, president of Largo Resources – a Canadian mining company with operations in Bahia, Brazil – taking care of people, paying attention to the human being, and being environmentally and socially aware should be a prerequisite for any company. “Not only because this is a metric that has been gaining strength in the investment market, but especially because when we prioritize human, social and environmental perception, we achieve a healthier work environment, happier employees, we bring a sense of pride and belonging to our organization, which also reflects in the society around us and this all, organically, translates into profitability.”
Paulo Misk is CEO and president of Largo Resources – a Canadian mining company with operations in Bahia, Brazil.
Largo, which has a unit focused on energy storage technology, has recently had its shares traded on Nasdaq, one of the main stock exchanges in the world with highly rigorous criteria focused on ESG. In this line, Misk highlights the company’s special care for the environment and people, from internal waste management and water reuse to the dissemination of social and environmental education.
“Our daily care and our projects are concerned with the welfare of needy communities, with improving the lives of families in the countryside of states where other sectors of industry, commerce and services would normally find it very difficult to reach,” he says. “I have a simple view of things and, with simplicity, I ask you: in which environment would you work better and happier? In a company where you identify with their values and purpose or in another company where you work just to earn your salary at the end of the month? Of course, you don’t even have to answer. Extraordinary results come from each person’s passion in doing what they love and think is worthwhile.”
Profitability with awareness
At Largo Resources, he highlights, “being profitable comes as a result of our actions, the determination of our workers, the inclusion and training of a diverse workforce, the support and investment in community projects that train teachers, young seamstresses, beekeepers, and promote sports and culture. Combining profit and social awareness is the driving force of the present for companies that understand their role and their space now and in the future. Largo, in fact, believes so much in this combination that our product, vanadium, has driven us to invest in technologies that enable greater use of clean energy with the goal of building a better world without carbon emissions in energy production.
The company, according to the leader, has projects in Bahia focused on education, professional training, training employees and, also, the people who live in the local communities. “We have just opened a SENAI training center in Maracás, whose objective is not to train professionals for the Vanádio of Maracás mining company, but for any activity generating opportunities for those who want to have a better life. The example of Ferbasa, which maintains education for more than 3 thousand students is fantastic. It is pure awareness of our role in society. Maybe we are bad at spreading the word. We need to spread the word to motivate more leaders to have this attitude. Our organizational culture prioritizes and recognizes the fact that, more than just employees, we have fathers and mothers of families, children, uncles, we have people with dreams, with the desire to realize and accomplish goals that we try, whenever possible, to dream and achieve together”.
Paulo Misk does not criticize those who invest in the development of professionals with the objective of having good results in the international stock market. “But this is not the reason that moves us. We prefer to see the smiles of those who took a professional learning opportunity to create a dignified life, full of hopes, dreams, and achievements.”
He also points out that ESG-focused operations generate a sense of pride and belonging on the part of employees, “which has incredible power. But beyond these important gains, ensuring that nature is preserved, disseminating conscious consumption, and permeating the culture of care among people is the greatest legacy of ESG-focused operations. It is knowing that these practices are not restricted to the business and operational environment, but are propagated in conversations with friends, in the way our employees raise their children, in the behavior of local communities, in the creation and extension of important values for life in society with respect for nature and people. It is contributing to make the world a better place. Need any more?”
The big ESG question: what to put into practice?
Enviromental:
projects around waste management, water saving, forest preservation, reduction of pollutant emissions such as carbon are at the top of the agenda;
Social:
pro-diversity practices, that favor women and people of color to occupy leadership positions, equal pay, actions benefiting the community that the company impacts are highly valued in ESG metrics;
Governance:
Ethics and transparency in corporate conduct, whether in its audits, executive compensation, tax payments, and smoothness in all processes.
