An analysis of the current practices, benchmarking and recommendations for corporate sustainability strategies.
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Introduction
This report delves into the sustainability practices of 66 publicly listed companies in the Corporate Sustainability Index ISE B3 portfolio, collectively responsible for R$1.74 trillion of market value, contributing to 17% of Brazil’s GDP and offering insights into the challenges and opportunities faced by large organizations in Brazil and beyond.
Methodology
Our analysis focused on the 2022 sustainability reports of these companies, examining 10 prioritized social, human, and natural resource themes. We utilized two assessment dimensions: impact measurement maturity and sustainability strategy maturity. These were mapped out across a selection of impact themes (e.g., climate change and living wage).
We used the definition of impact pathway, which encompasses input, output, outcome, and impact, to match corporates’ impact measurement dimension. For the strategy dimension, we used an action-based maturity ladder, from awareness to quantitative targets, tracked records, and integration into the business model.
Key Findings
Impact measurement maturity: For six of the ten themes (climate change, community development, diversity, education/skills, solid waste, and water), 88% to 97% of companies provided output metrics, while between 2% to 6% used outcome metrics. For four themes (human rights, biodiversity, living wage, and tax), maturity was notably lower, with a significant portion (around 97% of companies) either neglecting these themes in their sustainability strategies or offering only activity-level data.
Sustainability strategy maturity: While most companies (52% to 97%) acknowledged the relevance of community development, education/skills, water, human rights, solid waste, and biodiversity in their sustainability strategies, specific commitments and strategies for managing and improving them were lacking. Encouragingly, exceptions were noted for climate change and diversity, with 57% and 53%, respectively, setting measurable strategies. Themes such as living wage and taxes remained scarcely addressed, with only a couple of exceptions.
Insights for Action
Companies with advanced impact measurement practices are significantly more inclined to set mature sustainability strategies and embed them in their businesses. The data show an 11-fold increase in the likelihood of integrating sustainability and business strategies when outcomes were chosen as impact metrics. These findings underscore the importance of more robust measurements to bring corporate sustainability strategies to the next level.
Recommendations and Priorities
The main topics discussed in this study deal with the priority impacts for Brazil in relation to biodiversity, climate change, water, diversity, and living wage. The following key aspects should be considered:
1. Biodiversity:
Define what metrics are relevant to measuring biodiversity impacts and dependencies for your value chain then commit to protecting areas of higher biodiversity, including threatened species, and link those metrics to measurable targets. Examples include: Effective conservation and management of a fraction of the land that is significant and aligned with local biodiversity targets of the lands under the productive area (e.g., 30%) with a higher number of species, with an emphasis on areas of particular importance for ecosystem functioning and services.
2. Climate Change:
Determine your current carbon emissions and set a reduction target aligned with the Science Based Target initiative3 standard which provides guidance to set greenhouse gas (GHG) emissions reductions targets aligned with what is needed to keep global heating below catastrophic levels.
Plan actions to achieve the target and allocate a budget and resources to achieve the goals, considering the cost and benefits of the initiatives. E.g.: Reducing scopes 1, 2, and 3 of absolute carbon emissions, aligning with the needs established by the science-based target metrics for the sector.
3. Water:
Measure water footprint and assess risks and dependencies throughout the full value chain with outcome metrics to identify priority areas and strategic opportunities for improvement regarding water usage in your value chain. Develop a water regeneration strategy to achieve a net positive impact and set targets. E.g.: Nature-based solutions addressing water scarcity and drought that ensure a greater provision of water throughout the year.
4. Diversity:
Leverage diversity as a business opportunity by strategically prioritizing impactful initiatives and allocating resources. Establish an environment and targets that promote equity, particularly in low-level positions. This means, for example, that it is required to understand the needs and local context of vulnerable people and minorities and include them in defining strategies.
5. Living Wage:
Engage your business partners to address living wage in the value chain, prioritizing the most critical areas identified in your first benchmarking exercise and comparing all salaries paid to living wage reference values.
Establish outcome metrics of impact that enable your organization to clearly prioritize and communicate its social impact toward combating inequalities to all stakeholders. E.g.: Eliminate the living wage gap for third-party employees working in the company site in the horizon of three years. You can use the Global Living Wage Dataset from Valuing Impact to start your assessment. Check it here.
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