ESG (Environment, Social and Governance) practices are becoming increasingly important to businesses of many sectors. This change is a result of a change in customer behavior in response to the stands and actions of companies.
These movements are fruit of a new look at the conduct of current and past companies.
On March 25, 1911, a fire broke out at New York’s Triangle Shirtwaist Company. It killed about 130 women fighting for better working conditions. This event, one of the most emblematic at the beginning of the Industrial Revolution, culminated in the creation of International Women’s day years later.
In 2001, executives of the Enrom Company, an American energy company located in Texas, caused a financial scandal remembered to this day. Accounting fraud and a debt to the amount of 13 billion dollars. All so that executives could keep their annual bonuses tied to positive financial numbers. This event brought about a major change in corporate governance.
In Brazil, we have also had some known cases of impacts of large industries and companies on society. It is easy to recall, for example, the ruptures of the Mariana dam, owned by Samarco Mineradora, in 2015.
The tragedy caused 19 deaths and had incalculable impact on the environment. We also have the case of Vale’s Brumadinho dam in 2019. Its rupture caused 270 deaths and very profound social and environmental impacts in the region.
All of these cases are public and notorious. My intention here is not to defame any of these companies, as many of them have even taken actions and implemented policies to avoid future problems.
What am I getting at, then?
You may not even understand this list of scandals, but in fact, they all bring up the same questions: how can an ordinary consumer be sure that they are buying from the right company, one that has concerns that go beyond profit? How do they know that a company has works in an ethical and fair way, without harming the environment without causing negative social impact?
The behavior of the new consumer
Now more than ever, consumers want to know about the conduct of companies. Gone are the days when only quality and price of a product mattered in a purchase.
The new consumer knows that buying a product or acquiring the service of an unethical company is contributing to a vicious circle of bad practices and behaviors that continue to happen.
That is why the term ESG currently serves to encompass all the practices of a company in environmental, social and governance practices.
Understanding the acronym
The concept of ESG emerged in 2005, in the UN’s initiative “Who Cares Wins”, in partnership with financial institutions. Brazil was also present at the meeting, which sought criteria to include environmental, social and governance issues in the financial market. The report of the event concluded that these concerns contribute to a company being more sustainable and presenting better results for society. In other words: the more environmental and social awareness, the greater the business growth.
Companies can walk different ESG journeys. This is a path that can be guided by its CFO, HR, marketing and other areas within the company — a lot depends on the timing and type of business.
A common question for companies beginning their ESG journey: can you have ESG practices, even if you are not a publicly traded company with shares on the stock exchange? The answer is yes! Any company can have ESG practices, even without having shares on the stock exchange. What happens, in practice, is that publicly traded companies have headed the ESG movement.
Obviously, a company with large CO2 emissions may have a much greater concern in the Environment than one that only uses human capital.
On the other hand, a company that operates in more underprivileged areas may have the greatest concern with Social issues, both for labor training and for its social impact.
A company that prioritizes public biddings will pay more attention to the issue of Governance, to maintain compliance.
In other words, there are countless variables and possibilities. Obviously, companies with shares on the stock exchange are moving more because it is a growing topic on the table of boards and shareholders. But, as we mentioned earlier, every company can adhere to ESG practices.
How to be a company with ESG practices
Many companies begin their ESG journey through a self-declaration of environmental, social and governance actions. The next step would be to seek an external audit or other specialized ESG audits to then begin formal verification to obtain certification.
It is important to note that there is not a single certification that defines a company as ESG, but a variety of certifications that attest that a particular company follows practices with these principles.
Tip: partial certifications on one of the three letters can be highly beneficial, such as an ISO14001 for the “E”, for example. This all depends on the company’s strategy and budget, of course.
But it is worth mentioning an important point: for a company to be recognized for its ESG actions, it needs to address all the letters (environmental, social and governance practices) jointly. No company can be ES, EG, or SG alone, for example!
According to the report “Whats Next” from Inova Consulting’s 2021, ESG is one of the top business trends for that decade. The UN COP26, UN’s World Climate Conference, held in Glasgow in 2021, also reinforced the importance of reducing carbon emissions and prioritizing ESG in the world.
Action tips for the first steps
Many companies begin to adopt good ESG practices long before they seek any external recognition. Next, we will list some actions that contribute at the beginning of the journey.
The Environmental aspect, for example, deals with sustainable development as well as environmental preservation, including topics such as:
- Biodiversity conservation;
- Energy efficiency;
- Carbon emissions;
- Air and water pollution;
- Solid waste.
The Social aspect, on the other hand, is concerned with the company’s relationship with people, such as employees, customers and communities, looking at:
- Team diversity;
- Employee engagement;
- Privacy and protection of sensitive data;
- Respect for human and labor rights.
Finally, the aspects of Governance cover the administration of the company with regards to:
- Fighting corruption;
- Composition of the Administrative Council;
- Reporting channel;
- Corporate ethics and morals;
- Relationship with governments, politicians and government entities;
- Executive compensation.
ESG practices at Venturus
A company that complies with ESG practices understands its negative and positive impacts on society and is able to act on them. Michele Petsche, People and Culture Analyst at Venturus, says that we have already started this journey with practices and policies focused on ESG.
An example is the partnership we have with Flora Energia, a company that offers credits for the electricity bill from solar energy generation. In addition to using the service on Venturus, it is offered as a benefit to our employees, who can save on bills and encourage renewable energy sources.
This is a practice that goes according to the issues of Environment, Social and Governance, since at the same time it contributes to the environment and reduces the amount on the invoice. But it is not the only one, see what more we do here:
In Environment, we rely on practices that decrease our negative impact on the environment:
- Separate collection and disposal area for batteries;
- Self-closing faucets to reduce water consumption;
- 100% LED lighting, with circuits divided by area;
- Water and air quality analysis;
- Installation of frequency inverter in air-conditioning equipment, aiming to reduce energy consumption;
- Upper floor with layout that provides natural lighting;
- Digital signature instead of printing documents;
In the Social aspect, our initiatives aim to improve the quality of life of our employees and our local community:
- Diversity committee;
- Affinity groups in Workplace;
- Solidariza VNT — a philanthropic action to help mobilizes Campinas Against Hunger Project;
- Entrepreneurs in practice — an action to help NGOs;
- Donation of computers to individuals and NGOs, with the aim of contributing to learning and digital inclusion.
And on the issue of governance, we have adopted practices and policies aimed at transparency in accountability by decision makers and establishing a safe and welcoming work environment:
- Code of ethics and conduct;
- Reporting Portal;
- Live with the director and executives in which the results of the organization are presented monthly;
- Lgpd processes, M&A and audits;
Digital transformation as an ally
Digital transformation is certainly a fundamental ally for the ESG journey, as it identifies the gaps and important actions to be fulfilled within the company when it comes to compliance with ESG practices. We have a very interesting post about the theme.
And if digital transformation is a pain, nothing like knowledge to alleviate this suffering!
Here at Venturus we have a methodology used for years, and in constant modernization, which has already helped customers and partners find the right path in digital transformation.
Learn more: https://radartecnologico.venturus.org.br/