Country focus: Brazil

As the host of the United Nations Conference on Sustainable Development, or Rio+20, Brazil is inevitably under the spotlight this year. Worldwide specialists and politicians are looking closely at the state of sustainability in the country, and especially assessing the level of willingness of the Brazilian government, civil society and private sector to transform this major event into a real opportunity to lay the foundations of a green and inclusive economy. The key ingredient for the success of the discussions that will take place in Rio is the ability of several governments and civil society groups representing multiple interests to work together working on a common mission of establishing new operating models that enable business and society to address the most pressing social and environmental issues of the coming decades. Many experts agree that the right formulas and roadmaps to achieve that have already been designed. Currently, what is really at stake is the effectiveness of engaging the diversity of stakeholders to put solutions into practice.
This being said, how is stakeholder engagement carried out in Brazil today, by government, companies, and civil society? Are stakeholder practices still emerging or is there enough experience to be scaled up? What are the trends and future perspectives?

Quick national overview

Although Brazil's economic dynamism is still largely based on the primary sector and commodities exports, local and international stakeholders are increasingly calling for a more inclusive and responsible development model. While some allege Brazil is way ahead of other economies in terms of sustainable development, with an energy mix dominated by clean sources, improvements in income distribution and poverty alleviation, others are pointing to serious and unresolved issues such as deforestation, quality of education, corruption, labor conditions of millions of workers.
Today, there is increasing pressure from government, civil society, financial institutions and communities for companies to zero their negative impacts from operations and become solution providers for sustainability issues. Once voluntary or isolated, some initiatives are becoming the rule and being integrated into the business agenda: the efficient use of natural resources in production, the adoption of social and environmental standards in the supply chain, and the careful management of the quality of relationship with stakeholders, among others. But is that sufficient for business to keep up with this changing landscape and survive in a complex world? The companies that are leading the way are those who are able to anticipate the responses to key social, environmental and governance issues through regular business planning and effective stakeholder engagement approaches.

Shifting to stakeholder engagement strategies

In most Brazilian companies, the investor/institutional relations departments are usually responsible for dealing with key stakeholders. Part of their agenda is about maintaining relations with government authorities, legislators, courts, industry associations and investors. Instead of considering the opportunities, engagement is focused on risk management, and performed in a defensive and reactive manner mainly to respond to external pressure.
However, this is progressing with the influence of domestic as well as international forces. Companies are being demanded by governments, civil society, business partners and international organizations on to improve their engagement modus operandi and include more elements of transparency, accountability, cooperation and co-innovation. By adopting such elements in management processes, companies foster a positive atmosphere for their teams and key stakeholders to co-create new operating models to deal with business and societal challenges.
Business as usual will not be able to cope with this mission. Facing the biggest social and environmental hurdles while making profit to grow will require companies to shift from the stakeholder relations practice to development of stakeholder engagement strategies.
Click on these links to check inspiring practices from Natura, AES, Walmart and Nextel.

Corporate responsibility trends drive new stakeholder engagement approaches

With great influence of media, internet access and social networking, Brazilian society has reached an unprecedented level of awareness around sustainability issues like deforestation, corruption, biodiversity, poverty, forced labor and indigenous rights. Civil society organizations are finding a very fertile ground to advocate their demands and have launched massive campaigns on these topics that are mobilizing millions of people. Greenpeace, for instance, has been leading campaigns on the link of soy and beef expansion and deforestation, which has driven significant change in the business strategies of Brazilian agribusiness, consumer goods and retail companies. Recent mobilization around pig iron is already producing its first effects on industries such as car manufacturing, and companies have reacted by requiring supply chain assessments. Investigative reporting by NGO Reporter Brasil on slave labor is influencing government policies and corporate practice in the textile and steel value chains. Partnerships between NGOs like The Nature Conservancy, WWF Brazil, Conservation International and Aliança da Terra, universities such as Fundação Getúlio Vargas (FGV) and private sectors have resulted in important innovations in environmental and social public policies.
As consequence, financial institutions and investors, and companies are designing new standards for the most sensitive sectors. Major Brazilian banks have integrated the "Equator Principles" into project financing, and several players in the financial sector are engaging on both Principles for Responsible Investment (PRI) and Green Protocol (Protocolo Verde) to leverage new investment practices and responsible product developments. In the last decade, key Brazilian export products such as timber, soy, cotton, sugar, ethanol, beef and palm oil started to be regulated by multi-stakeholder initiatives. Today, they support companies in dealing with their impacts as well as mapping opportunities and promoting best practices.
The increased need for transparency is another major driver. The most common reporting guidelines among national companies, such as the Global Reporting Initiative (GRI), Dow Jones Sustainability Index (DJSI) and São Paulo's Stock Market Sustainability Index (ISE) are encouraging the disclosure of environmental, social and governance information. They are also helping companies translate principles such as inclusiveness, responsiveness and materiality into practice with the direct involvement of stakeholder perspectives.
Last but not least, the internationalization of Brazilian companies has been another crucial improvement driver in the responses to local sustainability issues and development of stakeholder engagement approaches, or presenting better performance than peers, are conditions to enter and establish. The access to new markets and financial resources for geographical expansion is often conditioned to proving that the company's performance is aligned with international standards or better than competitors'. Raising the bar for Brazilian companies operating abroad is also contributing more efficiency, productivity, better management of reputational risks in the supply chain and community relationship, as well as getting and maintaining licenses to operate.
Click on these links to check inspiring practices from Alcoa, Grupo Votorantim, Itaú – Unibanco, BP, and PepsiCo.

"Critical friends" and collaborative realization

Brazil has very strong organizations that represent emerging visions and aspirations from society. NGOs, social movements, universities, media, professional associations and unions have traditionally influenced government, public policies, legislation and the private sector. The majority of Brazilian civil society organizations are well integrated into international, national and local networks that are defining common strategies. They lead advocacy campaigns, mobilize constituencies, monitor government programs and policies and track private sector practices. At the same time, they have started to engage and establish partnerships with both government and private sector – overcoming a position of conflict and lack of dialogue.
Recently, many organizations have been supporting companies to develop new strategies and innovations. They include Imazon, an Amazon based NGO recognized by the Brazilian Ministry of Environment; Instituto Socioambiental (ISA), a NGO with decades of experience in supporting indigenous people with development projects and legal land recognition; and Amigos da Terra/Friends of the Earth, a NGO who trained the most important Brazilian banks to implement the Equator Principles and other sustainability policies.
Multi-stakeholder projects enable initiatives such as satellite monitoring of deforestation, supply chain impact analysis, assessment of global resource use, water and energy footprints at plant level, and the monitoring of labor conditions. Credit unions, cooperatives, social/solidarity economy and fair trade organizations are expanding opportunities for inclusive business that are partnering with banks and companies to improve their capability to deal with the small suppliers, distributors and customers. Other organizations are helping companies develop innovative technologies of sustainable production and eco-efficiency, access new customer preferences or invest in local development.
From the government perspective, the State and Federal Public Ministries have been strengthening law enforcement in the past years. Prosecutions and legal agreements regarding deforestation, impacts on indigenous people and traditional communities, slave and child labor, among others, are shaking value chains and excluding non-compliant companies from markets.

Recent research findings

According to the research "Strategies and Knowledge on Sustainability" by Uniethos with the 1,000 biggest companies in Brazil from the agribusiness, construction, energy, industry and financial sectors, only a small group of 2% of them have set proactive and continuous engagement approaches with key stakeholders groups as a way to seek leadership and explore innovation opportunities. More than 60% of Brazilian companies with sustainability strategies have partnerships with civil society organizations, and 50% of companies declare to have continuous relationship with stakeholders. Twenty-five percent of companies organize consultation processes but in less than 10% of companies stakeholders are participating in corporate governance mechanisms.
The companies that have been successful in developing and implementing stakeholder engagement strategies considered a set of key elements listed below and detailed in this platform:
  • Stakeholder engagement is part of corporate governance and processes, and is integrated with other corporate functions;
  • Stakeholder engagement is based on stakeholder mapping and analysis considering different geographic coverage (from local to international) and involving different groups (internal and external);
  • Stakeholder engagement is based on sustainability effectiveness, accountability and transparency;
  • Stakeholder engagement anticipates and supports reputational improvements at company and sector levels;
  • Stakeholder engagement is focused on the identification of shared responsibilities and collaborative relationships that contribute to strategic improvements in the long term.
In brief, stakeholder engagement is a process that must combine operational and strategic objectives, short and long terms, internal and external perspectives. The design of most adequate stakeholder engagement approaches depends on clear objectives and range from information and consultation to collaboration and governance.

Future perspectives

More than ever, competitive advantage rises from value creation aligned with stakeholder needs and expectations. Therefore, success depends on long term, continuous and strategic stakeholder engagement. High performing and enduring companies show ability to develop a strong network of suppliers and business partners, ensuring financial viability while building capacity and process to integrate engagement practices.
The new business environment and sustainability challenges demand different perspectives on stakeholder engagement. Brazilian and international companies operating in the country have excellent opportunities to develop consistent stakeholder engagement and sustainability strategies capable of establishing long lasting relationships and legitimacy, building "social license", developing solutions at operational level and supporting business results.
The cases and initiatives presented in this platform demonstrate that innovative ways of doing stakeholder engagement are already being developed and implemented. These practices are resulting in different approaches and perspectives, from communication and information strategies to creation of shared and common value.
It's time your company finds its own way!

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