Approximately 71% of Brazilian companies have adopted Environmental, Social, and Governance (ESG) practices, according to the ESG Panorama 2024 study released by Amcham Brasil – the American Chamber of Commerce. This represents a significant 24% increase from the previous year. Moreover, the implementation of ESGs appears to guarantee a growth in profits.
See also: What is ESG and why it is important?
This trend is even more remarkable because currently only public companies and financial institutions in Brazilia have been obliged by law to put in place and report on ESGs. This standard of practices has been implemented in a number of countries in an attempt to encourage companies to exert a positive impact on society and the environment, improve their governance practices and also serve as guiding principles for potential investors.
Encouraging statistics
The Sustainability in Business Leadership Agenda in Latin America study conducted by SAP reveals that seven out of 10 Brazilian companies have made significant progress in developing their sustainability agendas.
The study identified that C-level executives in Brazil clearly understand that the impact of sustainability extends beyond reputation or social responsibility or the legacy the organizations plan for the future; it has a direct impact on business results.
Abrão Neto, CEO of Amcham Brasil, described the increasing expansion of ESGs as “excellent news” but noted that “there is still ample room for improvement and growth, and innovations and public policies focused on this issue remain essential to deepen our commitment and enhance the effectiveness of ESG practices in the market”.
Return on ESG investments
Another study, ESG Radar, conducted by Infosys, reveals that global investments in ESG can yield a positive financial impact for companies. For every 10% increase in ESG spending, corporations could see a 1% rise in their profits.
In Brazil, 36% of companies implementing ESGs are already seeing results from their strategies, while 40% expect to see the effects within two to four years. Meanwhile, 24% expect to see results in 12 months.
Infosys surveyed over 2,500 executives and managers from companies worldwide with annual revenues exceeding US$500 million. According to 90% of the executives interviewed, adopting ESG practices within their organizations has led to positive financial returns. Of these, 29% reported significant profit growth, and 61% observed moderate improvements. Only 10% saw no difference, and none reported negative results.
Challenges of measurement
Experts suggest that incorporating good practices is crucial for attracting investments, securing credit, building credibility, and gaining market share. Therefore, the pursuit of a positive ESG rating has become a focal point for companies seeking to attract investments.
However, it appears that many companies face difficulties and challenges in measuring the results of ESG initiatives and, according to research conducted by SAP, six out of ten business leaders believe this is the main barrier to the growth of ESG initiatives.
Efforts are underway to address this gap in Brazil. One example is Paresi, a startup that analyzes data on social actions and projects, and produces reports aligned with the main global standards for social responsibility, including those set by the UN, GRI, and Human Rights.
Geovana Conti, CEO of Paresi, argues that companies should realize the challenges faced by the beneficiaries of their actions, understand the potential solutions to these problems, and assess the financial and human resources required for genuine transformation.
“The first step is to understand the scenario from the perspective of those who live in this reality. It is essential to conduct a diagnosis so that the board can strategically propose actions that align with the business and are genuinely transformative for the beneficiaries,” commented Geovana Conti.
