Today, all eyes are on ESG. And corporation actions are way more tangible and measurable than a couple of years ago. With the realization that corporates need to act, in fact, to address climate change and social gaps, governance became a source of knowledge to other companies’ department, being, in fact, the most mature sector to influence ESG, addressing it in the early 2000s, right after the Enron scandal broke out.
Stania our interviewer shared insights on how to better approach ESG.

What is missing for the social area to be better addressed?

Stania Moraes:

There is still a long way to go, and I believe that this is the aspect of ESG that has still not been given due attention. I do not see it being widely discussed and addressed within companies as it should. We must invest more, for example, in the inclusion of women and the LGBTQIA+ population in order to ensure that we have more diversity in companies, which could bring effective results and even financial results for business. We have to promote these people not only within companies and among business leaders, with the aim of fostering a positive transformation not only in companies, but also in society. Today, for example, women represent only 3% of CEOs in Brazil, 14% of the staff on the boards of directors, and 10-15% of the total managers in the financial area, which is very little, considering that we are more than 50% of the country’s population. We have made some progress, with women now accounting for 39.4% in companies, according to Forbes, compared to 34% in 2020. What are the reasons for this? A recent survey by LinkedIn has noted that women network less. The do not have the right connections, either because they do not have the time and energy or because they lack certain soft skills.

Fortunately, there are interesting initiatives today, such as the fact that KPMG has the first transgender partner in Brazil and the fact that there is a job website exclusively aimed at transgender people – TransEmpregos. Another interesting action is the Pact for the Promotion of Racial Equity, signed by executives of large Brazilian companies – including the Big 4. Much more is needed, however, to promote an effective transformation of the current reality, in which 70% of the poorest 10% are black, while among the wealthiest 10%, 70% are black.

Which sectors are most committed to good ESG practices and why?

Stania Moraes:

The sectors most engaged with ESG practices in Brazil, in my view, are cosmetics and pulp & paper, as well as other sectors that work directly with natural products, which are required carry out preservation actions. There are, however, other sectors that still face a great challenge in terms of the environment, such as textiles, which need to take care of all the stages of their production process until the final disposal of clothes that are no longer used. That is, they must define the methods to dispose of the water from the dyeing process, where to discard it, and what to do with the clothes in their final phase.

What are the main results or success stories in the Brazilian market regarding the implementation of best environmental, social and governance practices?

Stania Moraes:

We have three major success stories that stand out. These are Ambev, Natura and Suzano, which already have well-structured sustainability policies and a widely disseminated culture.

Is ESG already a concern among small and medium-sized companies, which are the vast majority of companies in the country?

Stania Moraes:

I believe that companies of all sizes should be committed to ESG. If they are not, they should be, as survival in the market today relies on having a sustainable policy that allows getting access to credit and winning new investors. Without good practices, it is very difficult to move forward in the business.

In your opinion, what are the steps to be followed by a company that is really committed to implementing ESG?

Stania Moraes:

The first step is to have a committee or, in the case of small businesses, someone who looks at these issues and engages in actions to meet environmental, governance and sustainability requirements. The second is to disseminate the ESG culture across all areas of the company, incorporating it into all daily activities. The third is to promote marketing, communication and events to help disseminate knowledge and engage all employees. Ciena, for example, ran a campaign some time ago in which people received a certificate for planting a seed in a forest in the world, and it was very important for all of us at the company. The fourth, which I think many will find controversial, is to combine corporate financial results and executive bonuses with meeting ESG goals, so there will literally be general engagement in the cause.

What are the main metrics used by companies to evaluate the results of their ESG practices?

Stania Moraes:

I believe that the main thing to follow are the global standards of the United Nations (UN) Sustainable Development Goals (SDGs), which are a call to action to end poverty, protect the planet, and ensure that all people have peace and prosperity. Among the SDGs, I highlight the first seven, which are poverty eradication; zero hunger and sustainable agriculture; health and well-being; quality education – ensuring inclusive, equitable and quality education and promoting lifelong learning opportunities for all; gender equality; clean water and sanitation; and affordable and clean energy for all. With this in mind, good metrics are the Carbon Efficient Index (ICO2) and the Corporate Sustainability Index, which is currently required by B3 for companies to be listed on the stock exchange. In other words, it is necessary to measure advances in decarbonization, water reuse, and biome regeneration, as well as the results of private social investments, reduction of reports of corruption and compliance violations, etc.

How can ESG benefit the Brazilian corporate market as a whole?

Stania Moraes:

With our companies adopting more responsible environmental, social and governance practices, we started to be seen more seriously by international markets, gaining credibility inside and outside the country.

Regarding the international assessment, what are the most serious vulnerabilities of Brazilian companies when it comes to ESG?

Stania Moraes:

Our vulnerability lies in proving that we are truly committed to ESG, linking corporate metrics to compliance, and actually making it happen. The market should demand good ESG practices, even if that implies slightly more expensive products, as it reduces the losses in the consumption of the chain as a whole.

What is the main mission of the boards of directors when it comes to ESG?

Stania Moraes:

On boards of directors, ESG is a current and very important topic, to the point where there are entire teams dedicated to addressing the matter. We consider ESC a commitment, which requires investments and metrics. Currently, the boards evaluate sustainability reports in detail, as the ESG has global dimensions and companies are being required to submit their indices and reports on sustainability in Brazil, so having a global report is no longer enough – it must be localized. Today, it is already mandatory for finance companies to know the ESG metrics applied in the reports, which are audited by major global consulting firms. This topic is so important that today, in addition to participating in the Furnas board, I am also a member of the “Accounting for Sustainability” (A4S) organization, launched by Prince Charles, which seeks to demand the financial validation of sustainability reports.

There are more women in senior financial roles now that it is recognized that they get good results and in response to incentives for diversity and the adoption of an ESG agenda by large companies.

But how can we expand the number of women working in different areas of companies and train a new generation of leaders to cope with the changes and difficulties of the world of business, while also supporting and developing existing and new generation teams.

Amidst all the complications posed by the end of the pandemic, with its serious impacts on the economy and traditional ways of working, plus the start of a war between Russia and Ukraine, the M&A Community brought together the financial chiefs of Ciena, E&Y, and Natura to discuss female leadership and the challenges and opportunities for financial planning and Boards of directors for 2022.

The importance modern companies place on the adoption of ESG practices

Alessandra Segatelli said that for Natura’s Board, one of the major concerns, now and always, is how to get good results while assuring sustainability. She asserted that despite the war in Europe and the economic recession generated by the pandemic, this goal is totally compatible with the adoption of ESG.

Stania Moraes reported that the companies in which she works are still focused on managing supply chain problems caused by the pandemic, with the impact on several sectors, especially telecommunications and automotive, expected to last for another 18-24 months. The upside of the current supply crisis, according to her, is that foreign investors have started to pay more attention to Latin America, with its wealth of natural and water resources, which allows the region to produce clean energy and supply essential raw materials to address sustainability issues in the medium and long term.

Paula Tashima highlighted that the financial arena is still very male, but women have been bringing a new-look in terms of innovation, hospitality, and sustainability. “Everyone talks about ESG, but many people don’t know what it really means. ESG is about companies’ obligations towards society and the future. It is something that we should all pay attention to on a day-to-day basis,” said Paula.

Stania added that leaders must have commitment and set an example so that Boards can see what they do and realize that it is possible to implement good ESG practices. “Nowadays, we can finally be ourselves in leadership roles, and this gives us the opportunity to help put ESG on the agenda for real. To achieve this we have to keep learning, widening our horizons, and keeping up to date. Governance, for example, is a constant challenge and requires better knowledge of what happens here and abroad. We also need good mentors, people who can guide others and help them to improve their skills,” explained the Ciena executive.

The adoption of ESG policies by national companies

This matter has been evolving year by year and companies have dedicated a lot of time and attention to improving their practices, mainly related to sustainability, with actions to reduce carbon emissions, save and reuse water, and energy use. They have also considered governance, with strict compliance rules.

“It is interesting to note that 10 years ago, no one knew how to implement a good governance system and the costs were extremely high. Today, most companies already have good practices as part of their culture. Now the focus is on sustainability and many are looking for ways to better measure results. However, in Brazil, a fundamental issue to be addressed is the social one, which requires more investment and effort”, explains Stania.

The problem is that not all companies have enough capital to invest in the social area. “I think that one good way for a company to start is by expanding the diversity of its staff, offering equal opportunities and benefits,” added Alessandra.

For the participants, another point to address is how to improve the quality and depth of the data collected and presented to shareholders and society. “Brazilian publicly traded companies are very advanced in producing really consistent ESG reports. But many companies still can’t publish such documents due to the very high costs and, above all, the difficulty of making good social, sustainable and governance practices a real part of their culture,” as Alessandra warns.

Female leadership

During the conversation, the speakers drew attention to the fact that women are still under-represented, despite there being more women employed, and they believe that leaders in the sector have a major role to play in increasing female participation in the coming years, especially in management and strategic leadership positions.

“A recent McKinsey report on the future of work pointed to a talent shortage and impacts on mental health – with high levels of anxiety and burnout – and found that women cope better in a tough environment, supporting their teams and other leaders because they have a more holistic view of well-being. This reinforces the importance of companies continuing to invest in diversity and for us, as leaders, to pursue the wider involvement of women,” commented Alessandra.

Stania claimed that having women in charge of finances increases companies’ profits, that diversity is good for results. However, currently women account for only 14% of directors on company Boards, an increase of 3% compared to 2020, a tiny gain that only emphasizes the need for more diversity.

“I work on the Furnas board, on which there are seven directors – three of them women – and I realize that it is a key platform to demonstrate the effectiveness of our presence in these organizations”, said Stania, arguing that this proves that companies are more committed to diversity. However, women in finance only make up 15% of the total workforce and there is still a need for greater empowerment to ensure that more women join, and go on to management roles.

One way of increasing the number of women in different areas is to set diversity quotas. “But a quota for women is just one of the ways to enter the market, it cannot be the only one. We aim to guarantee diversity within our team and root this issue in the company culture”, stresses Alessandra.

One curious aspect of this situation is that another recent survey by E&Y shows that companies with Boards that are at least 30% women, increase their gross margins by up to 15%. In other words, investing in diversity is good business for companies in all sectors, with proven positive impacts on their financial statements. As Rachel Maia says, “diversity is inviting people to a party and inclusion is asking them to dance.” “For this reason, we must undertake more initiatives that bring women into management”, commented Stania.

For Paula, the mission of leaders is to develop new female talent and give them support throughout their careers. This means offering equal opportunities to people of all races and genders, fostering diversity in companies, and always keeping in mind that the objective is good business results.

Ciena, for example, is developing an incentive program with schools in different communities to inform high school students about career opportunities in the fields of engineering, technology, and telecommunications. “The idea is to form a community base, with a long-term project to encourage the training of new professionals”, said Stania. It is a relevant initiative because girls need more female role models in different careers so that they can see more opportunities for them, and more examples of leaders in companies of all sectors.

How to identify women with leadership potential and help them develop soft skills

The key thing is to encourage professionals to create and maintain good networks, having repeated contact with people to exchange knowledge and experiences, as well as to help them build and consolidate a good reputation in the market. “Network means knowing how to relate to people both inside and outside the company, who we can and must listen to before making decisions, people who are capable of evaluating the most varied and complex situations and advising us. We must have the courage to seek out mentors because taking risks and accepting challenges is part of the journey, and it is easier when you have support,” emphasized Alessandra.

There is a key-tool of useful characteristics for good management, such as knowing how to deal with emotions in day to day business, having the flexibility to cope with constant changes, knowing how to manage your own time and your teams’, as well as being able to communicate with different professionals and with the market. “The market already knows that women are good executives and executors. The problem is that we are still rarely seen as leaders, and being a leader requires other skills. The good news is that the market can be taught, and we, at E&Y, for example, already have a specific program, and we are doing this, as are other companies,” said Paula.

How to share knowledge and delegate efficiently

“You need to know how to delegate, but delegate effectively. Only those who are “hands-on” can do this. However, you have to be careful because when a woman is too good at what she does, the company may decide to keep her in a certain position because they find it difficult to replace her. My advice is to form your teams and show that other people on the team are capable of doing the same or better than you to make your advancement possible. Don’t be too attached to functions, be more strategic and grow”, said Paula. It is essential to know how to balance operational and strategic views.

Another initiative discussed at the event was the creation a few years ago of the W-CFO, which aims to develop finance professionals and promote the exchange of ideas through mentoring, based on proprietary methodologies. “In W-CFO mentoring, we try to meet the needs of the woman who wants to lead with a mentor who has already lived the situation or works in a similar area so that the process is more effective”, explained Alessandra.

The speakers were unanimous on the need for sisterhood, with women supporting each other and encouraging each other to grow. In other words, stimulating investment in education and continuing development, inspiring young women, at the start of their careers, to seek promotion to the most senior roles. “Fortunately, today there are groups of women across various university departments who organize themselves to exchange ideas and help each other and this is very beneficial for the corporate market as a whole. Women should participate more in innovation, leadership, and entrepreneurship forums and committees,” concluded Paula.