ESG and public traded companies: where we are and where we need to go to

The definitions and determinations become more specific and demanding around the world, especially regarding the way organizations report their data and information on the subject. Recently the SEC (Securities and Exchange Commission) announced that it is considering imposing stricter rules on ESG disclosures by funds, to avoid the use of “green labels” that do not correspond to reality.

In Brazil, it is possible to identify a greater consolidation in the financial market of the maxim that ESG risk is financial risk, but the huge challenge around sustainability indicators is still in their subjectivity given the economic and financial aspects and the lack of clarity of organizations on how to carry out effective sustainability reports to the market. This demonstrates the impact of managing non-financial information when  generating value over time and managing the associated risks.

In the survey, ESG and publicly traded companies, carried out by Grant Thornton Brasil, XP Inc. and Dom Cabral Foundation, it was possible to verify that companies need to improve the dissemination of their practices. Only 43% of participating companies disclose information about ESG factors clearly and recurrently, using the Sustainability report (23%) and other corporate reports (20%).

Benefits Achieved

What we can see from the results of the recent survey is that the main driver of sustainability in the executive decision agenda of the vast majority of Brazilian organizations is still the pressure for compliance and issues related to brand valuation (17%), reputation improvement (15%), and risk reduction (13%). Although these factors are paramount for publicly traded companies and their positioning in the market, this scenario suggests a reactive agenda, which is not enough to meet the demands of a growing population, within current environmental limits. It is necessary to go the extra mile and address the sustainability as part of the business strategy.

The survey found that while 75% consider sustainability, social and governance issues as a priority, only 14% use them in decision making. Several reasons can lead to this discrepancy, including the fact that just over half (59%) of the companies have a department for ESG issues and only 19% report to the Board of Directors. Another index that deserves attention: less than half (48%) have their CFO involved with the ESG agenda.

When it comes to the ESG agenda, we need to understand where we are and where we need to go to. What do companies need to do to adapt to the best practices recommended in the world? What are the main challenges they face? How can they move forward? These questions are essential to give direction to sustainability actions and identify the company's level of maturity regarding ESG aspects, their points of evolution, prioritize them according to the strategy and integrate them into its operations.

In this process, in order for organizations to become increasingly committed to good practices related to ESG variables, it is essential that the board and the Board of Directors are engaged in the strategy of the ESG agenda, which is increasingly relevant for investors seeking greater returns with less risk.