7/31/2020
Sustainability has gained relevance in business debates in recent months in Brazil, either due to pressure from institutions of countries where the matter is more advanced, or the maturing process of society. In this context, the acronym ESG (for Environmental, Social and Governance – in Portuguese, ASG) emerges as an increasingly prominent movement in the corporate world, with a much more robust and structured agenda compared to the policies of good practices developed in recent decades.
The matter under debate is not just a trending topic, or the release of old subjects under a new approach. It is a new dynamic, in which the ESG factors no longer occupy a secondary place, but a leading position as guidelines for business and investments, which must have genuine purposes under the penalty of being disregarded, even if economically viable or promising.
Several surveys indicate that companies with a good ESG rating attract more investments and have better performance, greater toughness, and more prominence in the market. Among other factors, companies with effective adherence to good ESG practices have greater awareness and adequate responsibility in their choices, avoiding financial losses resulting from fines for environmental damages, labor indemnities, penalties and devaluation of the brand and image due to corruption cases.
With this new dynamic in mind, there is a challenge that is being faced by European and American regulators: the ESG factors are extremely complex, difficult to be defined, assessed and reported. Each acronym comprises several sensitive topics that have not yet been objectively embodied in uniform regulations. Due to the lack of consistent policies and assessment standards, there is a considerable risk of inefficiency, deadlocks, or even legal uncertainty.
In this regard, legal assessment is crucial to allow the development of consistent policies and the regulation of envisaged conducts with cohesion, either internally or in relations with third parties, so that ESG factors are implemented effectively. Without the proper technique, there is a risk that well-intentioned policies do not allow for an appropriate combination with the other documents of a transaction, for example.
In view of what is being followed abroad and the pressures that are already being exercised here in Brazil, companies that do not adapt to this new paradigm of the corporate world may face difficulties on the development of their activities, in central aspects such as customer loyalty, talent retention, branding and fundraising.
Our team is available to assess clients in relation to development of policies, implementation of strategies and risk management for the achievement of the excellence standards of the ESG process.
Coauthors: Renata Castro Veloso and Reynaldo Guimarães Vallú Neto
