The alignment of companies with ESG practices is a path of no return, as it results from an evolution in society and demands from investors who, increasingly, seek to ensure reputation with environmental, social and governance goals. This is confirmed by the vice-president of the Federation of Industries of Rio de Janeiro (Firjan CIRJ) Marco Saltini, who coordinates the ESG Business Working Group at the entity, and is also vice-president of Volkswagen Truck & Bus.
“Unfortunately, anyone who doesn’t understand this will have difficulties in the market”, he warns. For him, the disaster caused by the floods in Rio Grande do Sul, for example, shows the importance of actions to contain global warming, identified by scientists as one of the causes for the greater number and greater intensity of extreme weather events. “The most present topic today is the issue of climate change. But he’s not the only one,” adds.
Read below the main excerpts from the interview given to Reputation Feed.
Will the floods in Rio Grande do Sul impact the commitments or projects of Brazilian industries to reduce carbon and environmental emissions, against global warming and climate change?
The climate catastrophe that occurred in Rio Grande do Sul shows the importance of actions to contain global warming. For companies located in Rio Grande do Sul, there may be a momentary impact, but this should not compromise established medium-term goals.
“Companies’ greater concern with ESG reduces investor risk. Basically, ESG is about reducing the risk to which any company is exposed, through specific controls and attitudes.”
What topics were gaining the most attention so far?
There has been a transformation over the last few years and even a change in attitude on the part of society, today more concerned with issues that affect it on a daily basis and for which, essential for reasons of image and reputation, companies need be attentive, in tune with new aspects and new practices. The most present topic today is the issue of climate change. But it's not the only one. There is great concern about the issue of diversity and inclusion.
Reputation, the biggest advantage
Companies interviewed by Firjan in 2023 point to gains in adopting ESG criteria:
And how do corporate leaders position themselves in relation to ESG, in practice?
A survey we carried out at the beginning of the work, shortly after the creation of the group, in 2020, and redone in 2023, showed an important evolution. With a detail that I find very interesting: ESG metrics and criteria are not only applied by large corporations. Medium and small companies are also concerned about ESG. Often, they don't know exactly what this means, but they are already practicing criteria and metrics with the aim of having greater diversity, of inclusion – the issue of equity, of really having favorable attitudes towards society. Companies' greater concern with ESG reduces the risk for investors. Basically, when we talk about ESG, it's a bit like that. You really need to reduce the risk to which any company is exposed, through specific controls and attitudes.
On a daily basis, what is already the focus of companies in this area?
Without a doubt, we have worked a lot on the issue of climate change. Companies have published guidelines to align with the Paris Agreement and become net zero in X amount of time. Of course, they are more global corporations, but they care about contributing to the climate solution as part of the solution, not the problem. This is a tremendous challenge for all of us as a society. At the same time, when we go to a company environment, regardless of size, we notice that these issues more linked to diversity, inclusion, equity, are more present. Now, can we say that we are at a point that can be considered ideal? I don't think so. This is always continuous improvement work.
What else does a company gain by rigorously executing its internal ESG policies?
First, I think there is the issue of talent retention. As a company becomes more aligned with these issues, it ends up attracting more or losing talent. This is an additional gain when adopting these practices. Society has been evolving and is demanding that companies make more efforts. In addition to the investor issue, the company's own reputation in the market ends up bringing additional benefits.
“Public authorities have a fundamental role in encouraging companies to actually make investments to meet these new needs of society, without incurring a competitiveness penalty.”
How do you resolve the fact that sustainability, initially, means more investments and costs for companies?
As Brazilians, we are in a country in which it is essential that public authorities also take action in this regard. Today, we are facing the problem of the climate issue. In Europe and the United States, there are incentives linked to changing technological transport routes and people's mobility. You work towards, look, we want to get rid of, let's call it, fossil fuel. Let's move towards more sustainable fuels. And it gives encouragement to do so. In Brazil, unfortunately, we still don't have this. But it is what guarantees the competitiveness of these companies.
What are these incentives like?
Brazil has had a vehicle emissions program since the 1980s. You establish targets for maximum emission limits, have a testing procedure, and assess whether the vehicle meets those standards. If it meets, it can be sold on the market. And, over time, these standards are tightened, making them more rigorous, causing vehicles to emit less. Europe used, for a long time, a system in which tax incentives were given in advance to companies that adopted the most rigorous standards before the defined time. How can you sell at the same price? Because there was a tax incentive that allowed the additional cost to be equalized. Then, the competitor concludes that they cannot be left behind either.
Does Brazil have something similar?
Brazil has never done this, despite the industry having proposed it several times. The issue of competitiveness is necessarily linked to the business environment you are in, the perception that this investment can be compensated in another way. That is why public authorities have a fundamental role in this aspect, of encouraging company investments to meet these new needs of society, without incurring a competitiveness penalty.
But what, in fact, can public authorities do to offset the increase in ESG costs?
It does not necessarily need to be a tax incentive. In Europe, it is very common to have restrictions on the circulation of vehicles in a certain area. And, with a lower emission level, the vehicle can access this area. There are other mechanisms, such as government purchases. Public authorities score more on those who invest in ESG. Although the price of the product is higher, there is an additional gain for the company that meets certain standards.
How are companies facing more recent facts as a direct consequence of the climate crisis – floods, landslides, excessive heat, etc.?
The vast majority of global conglomerates and responsible companies are indeed concerned about the issue of climate change. There is increasing adherence to Global Compact. Companies are starting to worry about understanding their carbon footprint, in the three scopes. In this aspect, we, in Brazil, have a relative advantage. We have a relatively clean energy matrix, or cleaner, compared to that of other countries, especially developed countries in the Northern Hemisphere. When we talk about the Paris Agreement, we are talking about limiting the increase in the planet's temperature to 1.5ºC. This will only be achieved if everyone really makes a big effort to minimize emissions.
“We see this movement of companies concerned with reducing their carbon footprint, working with renewable sources, purchasing from suppliers who really have an attitude focused on sustainability. This ends up making people tend to pursue the same objective, which is to contain the issue of global warming. But it’s not easy, it’s a challenge.”
Clovis Malta is a journalist
clovis.malta@ankreputation.com.br
