CSR: Brazil’s CSR Leaders

Natura, the maker of natural skin-care products and cosmetics, incorporates its sustainability ethos into consumer marketing and sales materials and promotes it among employees, 3,500 of whom work at the corporate campus in Cajamar, São Paulo state, in offices or the main factory, seen here.

Banco do Brasil and Natura are among the corporate social responsibility leaders in Brazil, while foreign companies like Citi and Dow also push for CSR programs.

SÃO PAULO ­— Latin America’s leading economy, Brazil, is attempting to take center stage as the region’s leader in corporate social responsibility (more often these days considered under the umbrella of “sustainability” or “social-environmental responsibility”) and is one of the world’s fast-growing developing nations most committed to global sustainability practices.
But this has so far been led primarily by large Brazilian companies who have gone abroad — generally speaking, the large and more globalized the company, the more likely they are to have adopted CSR policies.
“Brazilian companies have gone international, and that’s a new big pressure,” says Claudio Boechat, sustainability expert at the Fundação Dom Cabral, a prestigious business school. “When you go abroad, if you prove that you are more inclusive, you get more attention.”
But a set of local pressures and the example of the big guns may cause local and smaller players to start to catch up. According to the Ethos Institute, which since 1998 has led the charge to bring the Brazilian economy on board with CSR best practices, more than 1,400 companies that account for 35 percent of Brazilian GDP are working with the institute toward social and environmental sustainability. This is growing every year. And many more will at least have a story to tell consumers and the media about the efforts they are making.
Locally, companies are being nudged in this direction by a familiar set of incentives: reputational risk, the concerns of consumers and government legislation. But in Brazil, the very powerful financial sector also plays a role by making loans more likely for companies with established sustainability practices.

BANKING SECTOR
Banco do Brasil, the public bank that is also the country’s largest, follows current fashion in leaving the term CSR (RSE, or responsabilidade social empresarial in Portuguese) behind. They prefer “social-environmental responsibility.” “The moment for CSR, at least as a term, is over,” Boechat says. “Those who use it are often seen as behind in the new discourse that wraps the issue up with broader environmental and social sustainability.”
In Brazil, public banks are not shy about admitting the influence of state or social goals in addition to profit maximization. After the crisis, the government openly pressured Banco do Brasil to increase lending to consumers to largely keep the country from slipping into recession. Similar mechanisms are at work with the bank’s push for sustainability.
“Social-environmental responsibility at Banco do Brasil merges with the bank’s own reason for existing, which is to contribute to sustainable development in the country,” says Robson Rocha, vice president of sustainable development at the bank.
The bank first really took a strong stance on sustainability in 2003, he says, and has since developed a special portfolio for regional development assistance to the tune of 10 million reais (US$6.2 million). Then there is Water Program Brazil, developed with the World Wildlife Foundation. But the bank’s most important effect on the country’s sustainability practices comes through its lending decisions to the broader economy.
“In the risk-analysis process, we’ve adopted social-environmental evaluation as one of the parameters, “ Rocha says. “We won’t take on clients involved in degrading work practices, and we won’t assume the risk of credit with clients responsible for serious damage to the environment.”
The process of moving Brazil in a responsible direction is a “path of no return,” Rocha says. “In a short while there will be no place in the market for companies that haven’t incorporated social and environmental concerns into their corporate strategies.”
It is not only the public banks with strong sustainability credentials. Private outfits Itaú Unibanco and Banco Bradesco, the second- and third-largest Brazilian banks, respectively, were early adopters as they became globally competitive.
Nor is the financial sector’s involvement limited to the Brazilian banks. Citi’s corporate social responsibility efforts in Brazil date back nearly two decades. What began with an inaugural community project in 1994 has evolved into a sustainability strategy focused on four “pillars”: financial education, sustainable finance, diversity and socio-environmental investment. Although these goals are shared by Citi operations worldwide, executives in Brazil implement them in ways that make sense for this market.
“By promoting volunteering, adherence of the local franchise to the Equator Principles and by making social investment focused on sustainable business, Citi Brazil started to institutionalize the path chosen to integrate and achieve sustainability,” CEO Gustavo Marin says. “The creation of the social and environmental responsibility area [in 2005-2006], with a dedicated team, marked the beginning of monitored and strategic social investments and of efforts to align social investment with Citi’s business focus.”
That alignment is perhaps most evident in its efforts to promote financial education.
Citi Brazil collaborated with the Brazilian Bank Federation (Febraban) to create an agenda for the inaugural financial education congress held in São Paulo last year. “This dialogue enabled Citi Brazil’s decision to invest in a public-private partnership that is piloting financial-education methodologies in public school curriculums, which aim at addressing the long-term component of an emerging middle class,” Marin says.
Financial institutions, Febraban and the Association of Credit Card and Service Companies (Abecs) are aware of the risks of over-indebtedness and its financial impact on business and society, Marin says.
“Greater transparency on the communication directed to this [new C] class has been considered, including the review of contracts and communication practices in order to provide clearer information and prevent lack of payment, over-indebtedness and stimulate the conscious use of credit,” he says. “The great challenge in this area for the financial market is to communicate in a clear, direct, transparent and effective way with this new class.”
Marin also sits on the board of the Mais Unidos Group, which aims to foster CSR efforts. Launched in 2006 by the then-U.S. Ambassador to Brazil, it is a public-private partnership between the U.S. Agency for International Development (USAID) and American companies with operations in Brazil. Today, roughly 100 companies representing a broad range of industries participate. Mais Unidos’ board is led by co-chairs U.S. Ambassador Thomas Shannon and Michel Levy of Microsoft.

EXISTING COMPANIES
Jorge Abrahão, president of the Ethos Institute, says the group’s first priority now is not to go after the companies that represent the other 65 percent of the economy.
“Rather, our challenge is to develop further the companies that are already together with our development platforms,” he says. “They can bring lots of other people on board and serve as an example to convince the government and the markets that everyone else should come along.”
One obvious draw to sustainability for certain kinds of publicly visible companies is citizen concern. “Thirty percent of consumers say that, at the moment of making purchase decisions, they think about sustainability. And that number is growing every year,” Abrahão says. “There are companies that don’t have that direct relationships with the consumer,” he adds. “But everyone has relationships with credit, with finance and with the government, and the question of responsibility is changing for them, too, as a result.”
Critics say the government has been too complacent, allowing big development projects to come before local environmental or human concerns. Most controversially, the Belo Monte dam project has been accused of being likely to disrupt river systems and displace indigenous peoples. It became a popular issue with film director James Cameron, former U.S. President Bill Clinton and actor/politician Arnold Schwarzenegger. More prosaically, the slow destruction of the Amazon, largely to clear lands for bovine grazing, has continued.
“Reputational concerns are the most important at the moment, more so than customer or government or financial pressure,” Boechat says.  “The companies have not matured enough to deal with this subject in the core businesses, and many don’t know how to get real value from engagement [with sustainability]. But reputation matters.”
The most high-profile and classic example of a company using the sustainability message to reach consumers directly is likely Natura, the beauty-care provider. Like Avon, they use a direct-sales model but outsell the American cosmetics company by stressing its Brazilian roots, recycled materials and good relationship to its local sources.
In 2007, the company launched a very public campaign to achieve a carbon-neutral production chain. Though it is still far off, its efforts have been much-publicized, as have products free of animal testing, good relationships with workers, and soaps made of plants.
Since then, Natura has developed a wide set of goals and large institutional framework for directing sustainability decisions.
“In 2008 we chose six priority themes,” says Janice Casara, sustainability manager at Natura. “The Amazon, biodiversity, greenhouse gases, education, product impact and quality of relations. These are reported by the sustainability committee to the senior management of Natura.”
“The sustainable use of biodiversity, for example, is one of our main innovation platforms,” Casara says. “This is a business decision.”
“We are guided by market studies which reaffirm the assertiveness of our business strategy,” she says. “The biggest increase in [consumer] consciousness has come in questions related to the ethical supply of natural resources, equitable distribution of benefits and biodiversity conservation. In Brazil, 93 percent of consumers have heard of biodiversity, a larger number than have heard of sustainable development or fair trade.”
Most analysts admit Natura’s efforts to connect have been successful. The company’s prestige is so recognized that the credibility of Green Party presidential candidate Marina Silva’s campaign was boosted when she chose Guilherme Leal, Natura’s president, as her running mate last year.
“Every day the understanding grows that our current development model needs to change,” Casara says.

GREEN DESIGN
Dow Brazil and the Dow Chemical Company Foundation were the lead sponsors of a Nature Conservancy three-year project that began in 2008 in the Cachoeira watershed to help restore the ecosystem that provides water to São Paulo. That project set the stage for Dow’s global, five-year, $10 million partnership with The Nature Conservancy that was announced earlier this year.
Both globally and locally, Dow is emphasizing education, environment and entrepreneurship, and back in 2005, it outlined a 10-year plan for Brazil. The company is conscious of reducing its own footprint as it also seeks to develop products that allow others to do so, too, says Paul Oakley, public affairs director, Dow Latin America. For example, when Dow was building a new headquarters for Latin America in São Paulo, the design was green.
Dow plans to construct a polyethylene plant in Brazil that uses ethanol derived from sugar cane as a feedstock. The company has already secured 17,000 hectares of sugar cane for the plant. “We continue to be enthusiastic about the benefits of a cane-to-polyethylene project for Dow’s growth in Brazil, as well as providing a renewable-plastic offering and self-sufficient bio-energy source, both of which reinforce Dow’s reputation as a worldwide leader in sustainable chemistry,” Oakley says.
Dow is now launching a 100-percent polyethylene stand-up pouch that can be recycled. “This has been developed in Latin America and will be leveraged around the world as it is a breakthrough in sustainable packaging,” Oakley adds.
But even in less obvious sectors, companies have taken it on themselves to have a sustainability policy. OdontoPrev, the dentistry company, is now working with Ethos and has a recycling joint venture with the University of São Paulo and offers free service to thousands of needy families.
“The Brazilian citizen is becoming more and more conscious and selective,” says José Roberto Pacheco, executive director at OdontoPrev. “In the last few years, the consumer is starting to believe that the activities of a socially responsible company need to go further than what the law requires.”
OdontoPrev also has programs for water reduction and plants trees in the attempt to offset its carbon usage. Pacheco rattles off statistics as to the efficacy of these and stresses the importance of shutting off lights and powering down computer monitors. He says awards are given to employees and collaborators who can reduce energy consumption.
“With time, the tendency is that it’s easier for the consumer to distinguish between companies that effectively adopt CSR practices based on consistent principles and those that just have fragments and don’t reflect real corporate beliefs,” Pacheco says.
Of course, there is still plenty of greenwash, and, like in most countries, it is more important to have a credible sustainability policy than to actually be sustainable.
“I don’t like to point to our best examples of companies,” says Abrahão, “because in reality the country doesn’t have a single company that is entirely socially or economically sustainable.” He adds, “Every company we work with is in a process of development.”
But when asked for the most relevant sectors, he lists the same as most international reports — banking, construction and mining. It is not a coincidence that these are also the sectors with the largest companies or the biggest international profile. For example, construction company Odebrecht acts widely internationally. Likewise, Vale, the mining giant largely responsible for Brazil’s No. 1 export, iron ore, is frequently cited as an industry leader. For Vale, a strong reputation in sustainability makes its many movements abroad easier.
“You cannot really say that small companies have a strong role yet. They could have a strong role if they become part of the commerce associations, but it hasn’t yet happened,” says Boechat, the sustainability expert.
“But we think that there is a pressure [that] is generalized now. The government is talking about it, everyone knows about climate change, and everyone is talking about inclusive markets and businesses — how to change the value chain, how to get value from all the relationships in it. I think it’s a new moment for Brazil.”
— Mary Sutter in Miami contributed to this report.

editorial@latintrade.com

Photo Courtesy of Natura