20 de agosto de 2021

ESG Themes: it’s time for training


Discussions on ESG topics are almost ubiquitous in business, academic, and journalistic landscapes today, both domestically and globally.

Day in, day out, we come across articles, live sessions, studies, analyses, interviews, debates, virtual events, and other actions related to these themes. Therefore, I will not delve into technical aspects related to ESG themes.

As a professional of Institutional and Government Relations (RIG), Advocacy and Communication, I want to focus on a point that deserves great attention: managers and strategic professionals in companies – including RIG and advocacy professionals who already have to be aware of different dimensions of performance and business – also have to incorporate the ESG on their radar.


ESG is here to stay!

ESG concepts do not only orbit large companies or large corporations and institutions. ESG themes have also become part of medium, small, and micro-enterprise businesses, and it is increasingly essential to understand how to incorporate them into everyday life. Companies of all sizes are being charged not only for their products and services but also for their social and environmental responsibility and governance.

Investors, opinion leaders, and consumers press for an active positioning of organizations concerning ESG issues. The products and services offered must be sustainable, and – as a logical consequence – the management of companies and organizations must have sustainability in the business as a guiding element. This requires conviction, talent, and effort, as everything must be thought of together with profitability.

But ESG themes are not exclusive to the private sector. Many governments realize that their processes, systems, and businesses need to be aligned with new global capital flows and sustainable development assumptions, including ESG. In this sense, aspects such as global warming and its implications, deforestation and its impacts, social inequality, the need for better quality education, and responsible governance in public functions deserve to be highlighted. Governments will soon be required to incorporate ESG principles into the way they run the state.


ESG X Financial Results

One of the most significant transformations linked to the ESG universe is related to the financial market. Many investors have started to prioritize and direct their investments towards companies and organizations that have ESG commitments.

Another point of influence is the consumers. Public opinion is more critical and aware, and brands with positioning and commitment to sustainability have increased the propensity to consume their products and services.

Although such matters have been discussed more forcefully in Europe, the US and Japan for a longer time (at least for six years), in Brazil this discussion began to gain greater relevance, especially since last year.

In the global scenario, it is estimated that at least $30 trillion in assets are currently under management by funds that only apply their resources to businesses and companies with sustainable practices. Half of this volume is found in Europe ($15 trillion) and a quarter in the US (approximately $7.5 trillion).

In Brazil, where the movement does not yet have the same scale, there was also significant growth in ESG investments. According to data from Anbima (Brazilian Association of Financial and Capital Market Entities), in February 2021, the net worth of funds in the sustainability and governance category was R$1.07 billion, almost double the amount a year ago. In the first two months of 2021, net funding was R$307.9 million, a growth of 787% compared to the same period of the previous year.

This expansion mainly results from interest and pressure from society, which requires companies to adopt sustainable and responsible social-environmental and governance practices. The advent of the Covid-19 pandemic and its enormous impacts reinforced this trend.


ESG themes need to be cross-cutting

Market demands and priorities are constantly changing, and companies need to adapt to these priorities. Currently, there are still few professionals in companies, managers, executives, other senior professionals, and board members who are fully trained in ESG issues.

There are specialists in environmental, social, and governance aspects working in isolation. It is therefore necessary to create a unified vision that permeates the entire organization. As a result, the training of managers, executives, and other employees, as well as ESG board members, is something that is being addressed but still unevenly in terms of effort and initiatives.

Several studies, research, and analyses have effectively demonstrated that ESG themes are not a fad or something ephemeral, but should be part of companies and organizations’ culture, management, and performance.

The study by the Chief Executives for Corporate Purpose (CECP), an international coalition of ESG leaders, launched in February 2021, showed that 70% of companies are already integrating ESG criteria in the performance evaluation and remuneration processes – especially for professionals senior level.

In its most recent analyses, the EY Center for Board Matters (CBM) identified the six most essential themes in the discussions of the Boards of Directors of Brazilian, Argentine, and Chilean companies. The ESG criteria appear as one of the three priority themes for the boards in 2021, alongside risk management and innovation. In the survey disclosed in April this year, 75% of those interviewed said that the topic was already on the agenda of Council meetings before 2020 and 7% said that the subject was already discussed but became more important due to the pandemic crisis.

Launched in 2020, the annual FIA Employee Experience Survey (FEEx) aims to recognize companies in Brazil most concerned with creating a work environment that can be both pleasant and productive. In this first edition, of the 213 participating companies, 75% indicated that they have sustainability as a strategic part of their business; 47% said they establish guidelines, goals and actions for the development of long-term sustainability; 27% indicated that they have structures and processes sustainable productions, which comply with the norms and standards of international certifications; and 36% indicated that they select their partners/suppliers based on sustainability principles.

The United Nations Global Compact research and study resulted in the June 2020 launch of the report “Leadership for the Decade of Action,” which shows what can be learned from leaders of companies integrating sustainability into their strategies, operations, and stakeholder relationships.

The report also highlights that four key attributes support this transforming and sustainable mindset:

  • Multilevel systems thinking, that is, the ability to include different actors in the construction of the company’s strategy;
  • Ability to include stakeholders in the transformation process;
  • Ability to challenge conventional approaches;
  • Emphasis on the long term, with the courage to break the dichotomy between sustainability and profit.


RIG and Advocacy Professionals

The importance of the RIG (institutional and governmental relations) and advocacy professionals in the strategic context of companies and organizations have been growing continuously. The horizon is infinite, and the challenges that lie ahead are enormous.

There must be a redoubled effort by the professional to not only correctly conceptualize what one wants to demand and understand the processes and systems involved, but also to have the capacity for cultural understanding of the political-economic-social moment and to read different contexts of the market and the society. That’s where ESG themes come into play.

The ESG themes pose a considerable challenge for the RIG and advocacy professional, especially in understanding specific knowledge, formulating policies and regulatory frameworks, and listening to the contradictory. It’s a permanent learning experience.

Undoubtedly, the discussion does not end here; on the contrary. It is a journey of constant debates and progress – a process in continuous evolution.

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