*By Fabio Rua
Coined in 2004, in a joint document by the World Bank, the UN Global Compact and 9 other financial institutions, the ESG concept emerged as a proposal to obtain answers from banks on how to integrate environmental, social and governance factors into the capital market. . By establishing the foundations of sustainable investment, the publication had several developments over the years, until the term gained prominence in the forums of international organizations, investment funds sheets, terms and conditions for obtaining financing and, more recently, in the startup investment rounds.
From there, a consensus was forged that became a mantra in the business world: profit and long-term success are only consistent if they bring a positive impact to companies, the economy, society and the planet.
Between the hype and the actions needed to demonstrate the companies' real socio-environmental commitment, there is a long way to go that, in my opinion, can only be covered through 3 interdependent and equally important pillars: values, metrics and technology.
The first is also present in the main organizational decisions, which include those related to people, career and company leadership. More diversity on boards and leadership roles. More Black, Asian, Disabled and Neurodiverse people. More hiring and progression programs truly committed to balancing vacancies filled with people of different nationalities, religions, sexual orientations, generations, professions and diverse skills.
And what was once seen as pure assistance, today has been increasingly seen as part of a strategy of innovation, growth, development and, I don't see an exaggeration in saying it, of survival. And not just for companies, since we are talking about systemic issues, whose solutions will only come out of the “dry ice” mode when truly built in a network.
To be fair, some of the collective responses we seek have been built both by global movements (such as the aforementioned Global Compact, the B Team and the World Economic Forum) , as well as by highly meritorious local initiatives worthy of engagement, such as the Maturi (a platform that brings together job opportunities for mature and experienced people), + Diversidade (consulting on diversity and inclusion), Todxs (NGO that promotes the inclusion of LGBTI+ people) and many others.
Looking now at the metrics, they are essential to prove the result that companies claim to record in their ESG strategies and, consequently, to ward off the ghost of Greenwashing, or “Green Makeup” – used by some companies to convey a different image than their real socio-environmental commitment, usually not as virtuous as their communications and speeches make it seem.
Worldwide, the topic of ESG metrics is one of the hottest topics, as there is no consensus on what and how indicators should be reported. Even so, more and more organizations have gone public to formalize their *socio-environmental* commitments through reports and various communications, which is excellent. But without a minimally accepted definition of standards, it is difficult to compare.
Unfortunately, I don't see anywhere in the world a truly global effort to ensure that we have a uniform basis of comparison. Just to illustrate, in recent months we have had at least 3 sets of rules for the disclosure of sustainability information being proposed by different regulatory bodies. The US Securities and Exchange Commission (SEC), the European Financial Reporting Advisory Group (EFRAG) and the International Sustainabilty Standards Board (ISSB) have been working to establish their reporting standard, which will have validity, scope and costs different depending on the jurisdiction of the body.
While no conclusion is reached regarding the best methodology for ESG metrics, it is essential that each organization continues to seriously commit and implement concrete actions in the main existing sustainability practices.
In addition to the reports and the sincere desire to adopt good practices that position the company in a citizen, responsible and sustainable way and, at the same time, strengthen its brand, attract customers, new talents and increase profitability, one of the greatest allies we have is The technology.
Through the use of artificial intelligence, we have already managed to integrate systems, create reports, capture financial and non-financial indicators, in addition to generating insights with structured data on energy consumption, workforce and supplier diversification, waste recycling, sustainable disposal waste, carbon footprint, rainwater reuse and much more.
The modernization of IT infrastructure (replacement of obsolete equipment), the search for investments in the generation or purchase of renewable energy credits (solar and wind) to supply factories and offices, digital transformation, the internet of things, the use of of cloud solutions and investment in automation also reinforce the point about how technology adoption connects with ESG goals and, above all, with the socio-environmental commitment of companies.
But this is a challenge that goes far beyond using the technology already available to encourage corporate responsibility and concerns the choices that society needs to make as soon as possible to avoid a true climate disaster in a few decades.
The world currently releases the equivalent of 51 billion tons of greenhouse gases into the atmosphere every year, which, needless to say, is accelerating climate change and increasingly impacting life on the planet. And once again, the greatest ally capable of leading us on a journey in which the substantial reduction of these emissions is the goal is technology.
Technologies that do not yet exist in scale or immediate conditions of use will demand billionaire investments for their development. Something never before imagined and that, in order to succeed, will need sources of funding, protection and incentives, venture capital in companies with promising ideas and funds for research in clean energy.
A global consensus will also be needed that countries also need to make a huge effort in building public policies that create the regulatory environment necessary to drive the development of carbon-free electricity generation and storage at scale, but also mechanisms to capture this carbon. same carbon before it reaches the atmosphere, which already exists, but still with significant cost challenges.
As complex and challenging as it is to move from the hype to the practice of ESG, my final message is one of optimism, with the realization that there are great advances being made in all the pillars mentioned and, what is better, a change in mindset and attitudes. growing among top business and government leaders.
In the preface to the excellent book Impacto Positivo, by Paul Polman (former CEO of Unilever) and Andrew Winston (one of the main thinkers on sustainable business strategy), there is a sentence by Guilherme Leal (Co-founder of Natura) that says “we cannot be satisfied in complying with what is provided for by law or promoting incremental improvements. Business has to go beyond the logic of doing less harm and promises of actions in the distant future... More than ever, it's time to act... and no one changes anything alone”.
* Fabio Rua, Vice President of the Brazilian Software Association (ABES) and Global ESG Policy Leader at IBM
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