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| *Por Luís Fernando Guedes |
A company only justifies its existence to the extent that it efficiently meets one or more social desires. It follows that changes in the dynamics of society, whether in the field of ethics, health or even culture, demand a quick and visible response from companies. Those that respond better and faster to the public they serve or, even better, those that anticipate demands that are still incipient become competitive. We admire those that are vectors of social progress towards what we want to see more: social equity, integration with the environment, promotion of diversity and generation of shared wealth.
Thus, I perceive that a strategic change of great proportions in business management is underway. The public is increasingly demanding that companies have a sincere and lasting commitment to socially and environmentally sustainable guidelines. Governments, ours and almost all, do not have the capacity by themselves to carry out this agenda. It is up to organizations in general, and large ones in particular, to lead efforts, set an example and take ownership of this agenda. Those who don't understand their new role run the risk of becoming irrelevant, which is the worst thing that can happen to a business.
Governments from the European Union, the US and China, in addition to multilateral organizations, have been beating the regulatory drum in favor of decarbonization for some time now and the echoes have reached the executive level of organizations, both through the still partially diffused voice of society, as well as in a more structured way, coming from the Board of Directors.
The expected pace of change demands a review of policies and practical measures in the quest to find a new way to generate value – even if it implies losses in the short term. At this time when doing is absolutely necessary, it becomes strategic to find efficient ways to communicate progress in the socio-environmental arena. And therein lies a danger...
Strictly speaking, greenwashing can be understood as a misalignment, intentional or not, between communication about progress in socio-environmental actions and auditable evidence of that progress. Added to this concept are empty promises and ambiguous expressions, such as 'friendly to the earth' or 'sustainable', as well as the misuse of environmental compensations.
Therefore, the consequences of greenwashing are becoming more serious for companies, with major losses on the horizon. A few years ago, commitments in favor of socio-environmental sustainability received little scrutiny, but especially after the pandemic, we began to reflect more deeply on our role in the ecosystem – more as participants and, perhaps, less as protagonists.
A clear implication is the societal expectation that organizations diligently address their social and environmental impact and make public their commitment to raising the bar. In April 2021, for example, the European Commission adopted a new Corporate Sustainability Reporting Directive (CSRD), through which all large companies in the bloc must demonstrate non-financial data in a more detailed and auditable manner, in addition to requiring that companies digitally 'tag' reported information so that it can be processed by artificial intelligence algorithms, facilitating aggregate control of the information by authorities.
During the COP26 in Glasgow, the IFRS launches the International Sustainability Standards Board, a framework for regulators around the world to define rules on non-financial disclosures and at the same conference the Secretary General of the United Nations, António Guterrez, publicly assumes the commitment to constitute an international panel of experts to “set clear standards for measuring and analyzing net zero emissions commitments”. The group of experts will present a proposal within a year, focusing on four areas: setting standards and definitions for net-zero emissions targets; implementation of credibility criteria to assess objectives; design of processes for verifying progress against commitments and plans for decarbonization and definition of a roadmap for deploying standards and criteria into international and national regulations.Covering up a socially or environmentally out of line action with social expectation can cause considerable damage to the company's reputation. I'm not just talking about the market loss, which can be the most immediate consequence, but the shock that can be caused on the front of the battle for talent - the best of Generation Y (born in the 80s and 90s) and those who are coming from Generation Y Z (mainly those born around the 2000s) hope to work for companies whose values reflect their time: diversity, engagement, activism, humanization of relationships, not to mention intensive use of digital technology. In this environment, attracting and retaining the best involves developing a culture in which talented individuals can see their values and culture reflected.
This is an important moment for leadership to publicly echo sustainability commitments, clearly stating the steps they are taking to achieve ESG goals year over year. I have seen that a winning strategy involves centralizing external communication and decentralizing internal communication, as a way of providing transparency to the journey and seeking shared commitment within the house.
After genuine and articulate commitment, it's up to senior leadership to find the right tone for the message. The search is for a delicate balance between detailing actions, concrete evidence of advances and conciseness. The roles of the Public Relations and Marketing area are strengthened, mainly to support the search for the right message, in the right channel and at the speed of the market, including playing the role of articulating internally and externally what sustainability means in the context of the company's operations .
The current sustainability reporting model used by large companies is largely voluntary and riddled with problems. Many aspects reported are materially irrelevant, if not factually wrong, and fail to reveal many things that matter. Consulting firms have sought to specialize in the subject at a rapid pace, seeking not only to support companies in optimizing their socio-environmental efforts, but also to understand how the regulatory framework will evolve in the coming years.
Companies that are prepared to do the right thing will also be positioned in a place of authenticity to report their commitments and achievements – and that is what the talents of your organization, the best customers and us, society, await.
*Luís Fernando Guedes is a consultant and professor at the FIA Business School, focusing on consulting projects for the public sector. He has been actively working as an Innovation and Competitiveness researcher since 2008
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