The “S” pillar of ESG in times of economic crisis

The advent of the pandemic and the economic crisis that followed, to a greater or lesser degree in several countries, sharpened the senses of consumers and investors regarding the social pillar of the ESG practice, as it includes respect for labor laws, work safety, training and retention of talent, respect for diversity, etc.

With a small drop in the second quarter, compared to the previous quarter, the Brazilian unemployment rate in the third half of 2021 was 12.6% (IBGE) , still representing 13.5 million unemployed. And, despite the fall in unemployment, informality grew and the real income of Brazilians had a historical fall , induced, including, by the rise in the Dollar and its consequences and repercussion in the purchasing power of workers .

This is precisely the critical point of pillar S. It is worth remembering that the first pillar of the Sustainable Development Goals (SDGs) of the United Nations (UN) agenda are people (P1), since the development of societies is associated with ensuring of a more dignified and egalitarian life, followed by P2 (Prosperity), because lives must be lived with dignity, and “that dignity can only exist to the extent that it can be supported”, points out P2 of the SDGs .

Arthur Covatti, CEO of DEEP believes that “in addition to social welfare issues involving occupational health and safety, diversity, the S pillar of ESG needs to pay attention to income generation and opportunity, which are determinant elements of social justice. . Not necessarily generating employment means generating income. There is, in this case, the exchange of work for money. The important thing is that the worker starts to receive more over time as productivity increases. It is social ascension , the generation of income itself” , he assesses.

In Brazil – and in other developing countries –, the growth in unemployment rates further evidenced the need for companies to invest in the “ S ” of ESG, including to maintain the balance between the three pillars and strengthen their brands in the face of the market and consumers, when announcing their results.

Renata Faber, head of ESG at Exame.invest highlights the importance of organizations' human capital and emphasizes that actions to attract and retain talent and train, allied to the promotion of diversity policies, play a leading role in achieving ESG goals.

One of the most emblematic examples of the practice of the social pillar of ESG came from Magalu, which, in addition to not laying off any employees during the height of the pandemic – with all stores closed – also instituted a trainee program exclusively for blacks. Initiatives of this type can, over time, reduce social and economic inequalities within companies and the communities where they operate.

“ We need to rethink our way of doing things, question our habits and behaviors and not be afraid to let go of what no longer serves us. Respecting the legacy, of course ,” Fred Trajano, CEO of Magalu, tells Forbes .

from the door out

The perception of consumers and other stakeholders about a particular company or product also involves the relationship between companies and the communities where they operate.

Covatti recalls that another important social element for the company is its attention to the surrounding communities. “A company that is headquartered in a city has to be looking at the needy communities in that location, the vulnerable communities, making those communities more harmonious, even looking for local talents” .

Another very important point of the S pillar is the sustainability of the supply chain itself. Here, it is necessary to take into account how the company treats its supply chain, especially the small ones. This has a very big social impact .

It is worth remembering that preserving the sustainability of the supply chain also means preserving employment and income within the companies and communities affected by this chain. And reporting this requires special attention.

Social pillar reflected in the reports

DEEP believes that, today, sustainability reports are very notarial and fail to express and reveal, more accurately, all the dimensions of the social impacts produced by companies, for example. It is a natural tendency that people want to look a lot at the company's current photo, looking at facts that do not always reflect a reality – income generation is one of them.

The DEEP Value platform innovation gives this picture, but one of the things that the company wants to draw attention to and develop are products that show every film – from this perspective on the extent of impacts: what the company’s supply chain is like today , what the company's employees are like at the moment, as well as what they were like yesterday and what the trend is for tomorrow. After all, assesses Arthur, “a company can have blacks and women, for example, but they can be stagnant, without this reflecting a professional rise and a demonstration of the evolution of society” .

At DEEP there is a belief that it is important to watch, in this film, how people grow over time, how a woman's career evolves within the company, how the company contributes to the improvement of employees, increase in schooling, and prosperity. individual.

Standardizing ESG Information

During the 2021 United Nations Climate Change Conference (COP 26), held in Glasgow, Scotland , the International Financial Reporting Standards Foundation (IFRS), responsible for global financial reporting standards for companies, announced important advances in this global agenda. One of these advances is aimed at consolidating ESG information standards with the formation of the International Sustainability Standards Board (ISSB) , bringing the same assessment context “ to provide the global financial markets with high-quality disclosures on the climate and other sustainability issues” .

Although this trajectory will require a lot of coordination on the part of the organizations involved, it is expected, with this, to reach an important goal for the market: the standardization of standards so that companies around the world and market agents can work with the same assessment bases. Making this standard mandatory will be crucial for investment decision making by various actors, ESG fund managers, corporate executives, and individual investors. This is a moment of relevant transformation that will demand a lot of efforts and innovations for the market.

With this, regardless of the choices and approaches to these standards and the statements made by companies, it becomes even more essential to measure the impacts from this social perspective, looking in detail, frame by frame , this unfolding.






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