The case for corporate social responsibility in Latin America and Brazil.
BY CARIN ZISSIS
Brazil’s Helio Mattar, who serves as the president of the Akatu Institute for Conscious Consumption and founded the Ethos Institute for Social Responsibility talks with Carin Zissis, online managing editor for the Americas Society/Council of the Americas about the strength of the corporate social responsibility movement (CSR) in Brazil and across the Americas. Mattar, a leading expert in the field of CSR, discusses the factors behind Brazil’s prominent CSR movement and the need for companies to remain accountable to consumers. A former CEO and government minister, Mattar outlines essential evolution for companies must undertake to maximize the capacity of CSR efforts. “[W]e’ve changed the level of consciousness in the market, and companies will have to change the level of action that they will have in social and environmental areas,” says Mattar, who served as a moderator of an AS/COA roundtable on CSR during AS/COA’s annual Latin American Cities Conference in São Paulo, Brazil in July 2008.
AS/COA: Across Latin America, according to Akatú’s research, 50 to 80 percent of consumers have an interest in what companies are doing in terms of corporate social responsibility. The rate is particularly high in Brazil.
Mattar: It is. It has been between 75 and 78 percent in the last seven years.
AS/COA: What are the factors behind this high rate of interest in CSR in Brazil?
Mattar: I think there is one attribute, which it is not Brazilian. I am totally convinced that mass communication, Internet all over the place, and telecommunications all over the place means that people are becoming more and more sensitive to social and environmental issues. In the case of Brazil specifically—and this is very specific to Brazil—the media is involved in that in a very strong way. It’s very different from other countries and very different from the United States. I am a member of the board of some U.S. organizations that sometimes send us an article or a piece of news that was in such and such newspaper, and it’s very clear that’s a very important fact that one article was present in a newspaper or a magazine.
Just to give you an indication, in the case of Akatú last year the amount of space that Akatú plus countries’ consumption combined occupied in the Brazilian media—TV, radio, magazine, and newspapers—was equivalent to 21 million dollars in space. That’s very particular in Brazil; the media is very strong in terms of talking about environmental and social issues, which makes people in general very sensitive to those issues.
It is very important to say that this has a historical root, and the historical root is that Brazil had a military regime up to 1986. The media was very important in being able to democratize the country, and many of the journalists were used to the fact that they had a role in social development. After the democratization of the country, these journalists became editors and directors in different media organizations, and they were very eager to continue to contribute.
One of the pieces of data that is so interesting to show is that among the 5 percent that have the highest level of consciousness in consumption, 57 percent are social classes C and D, and 43 percent are classes A and B. The expectation, on our part, was that because classes C and D have lower levels of education and lower income and less access to information that the percentage of C and D among the five percent would be much lower. It is lower than in the population in general, but it is 57 percent in that specific group. Why is it so? If it was not through education, if it’s not through information, the reason is because the media is so active in talking about the environmental and social problems and the role of companies in that.
AS/COA: A company can be quickly discredited by media, particularly because of the fast movement of news disseminated through Internet communication these days. Is there a way companies can build their credibility in the face of such rapid and constant coverage?
Mattar: My personal view is that the best way for companies to do it is to follow one basic rule of CSR, which is to be in constant dialogue with the different stakeholders. It is easier to talk about constant dialogue with, let’s say, suppliers. It’s much more difficult to talk about dialogue with consumers. But you can have groups of consumers in different regions and you don’t need to have the highest level of the company talking to them—you can distribute responsibility through the company so that people are constantly talking. You can use the Internet for consumers to dialogue with the company and to be in constant dialogue with NGOs. So when you bring the different stakeholders to talk to the company, they will express to the company what are the things they don’t like about the company and what are the things they would like the company to change. So that’s one important thing.
The second important thing is social and environmental reports. My personal view is that if companies are able to express in their reports both the positive and the negative, both what they’re doing well and what they think they’re not doing so well, and talk about what steps they are going to undertake in order to become better citizens in each one of these areas, then that helps a lot in terms of credibility.
But companies don’t think like that. That’s a basic change in paradigm. Companies think that they have to say only the good things about what they do. Or companies say, “I’ve always been socially responsible through all the life of my company.” That’s not true, because demands on the part of the market were totally different in the past, so to be socially responsible means to respond to demands in the market. Since then we’ve changed the level of consciousness in the market, and companies will have to change the level of action that they will have in social and environmental areas.
AS/COA: There are 29 companies that are among the 100 biggest economies in the world. I the case of democracies, there are certain checks and balances on power. In terms of companies, an issue that gets brought up is agencies that monitor companies. Is there a way for these monitoring agencies to themselves have credibility and to maintain independence in order to truly assess and provide checks and balances for companies?
Mattar: The self-regulatory process—it’s not self, because it would imply that the company itself is regulated—but the regulatory process, first of all, is a process that starts among the people that are closest to the company on a day-to-day basis. One of the biggest difficulties with the auditing processes is that it is done today and then it is done again in one year. It’s not a continuous process of regulation. Employees, for instance, are continuous partners with the company, so they’re able to talk about what’s happening, what’s good, and what’s not so good.
I think the first regulatory instance would take place in these dialogues with people who are close to the company on a day-to-day basis, so that they can perceive what a company is really doing, and perceive what are the inconsistencies between what a company says and what a company does. The auditing process is important, like the reporting process is important. To report according to the GRI (Global Reporting Initiative) rules and to really try to be as consistent as possible in reporting, that’s very important. But that’s a one-sided view of the company. Even the auditing is, in a way, one-sided because it takes specific issues to acknowledge what the company is doing or not doing.
When you talk to the different stakeholders in a continuous dialogue process, the issues are the ones that are called to the attention of these stakeholders. So the expectation is not that of the company, of that of the rules of a specific standard, or that of what GRI says should be reported. It is what is important to each one of the stakeholders.
That is, in my view, the process in which the company would best, first of all, manage risk. Some companies are into CSR only to manage risk. It is a pity, but that’s the way it is. Secondly, to really have the checks and balances that you’re talking about brought into a company involves establishing checks and balances in a system which, by its nature, is not democratic (and it is not to be democratic and I am not proposing that it should be democratic). I’m just proposing that checks and balances should be established, not in a rigid bureaucratic way, but through talk among the company and the different stakeholders.
AS/COA: You obviously have long experience focused on CSR. I am wondering if you can talk a little bit about how you’ve seen CSR evolve, not only in Brazil specifically but in the Americas as a whole.
Mattar: I have to say that, unlike most of the people who are in NGOs in Brazil, I come from the business side of the equation. I was a businessman for more than 20 years, I had my own company, and I was the president of GE Appliances in Brazil. So I think I know very well how companies act and how they react to stimulus from the outside. That gives me the possibility of looking at companies in a more humanized way; humanized in the sense of not demanding from companies more than it is possible at a certain point in time to demand.
In Brazil, like in any other country, CSR started with philanthropic acts of charity. This was done in a very fragmented way in which organizations and people would come to a company and say, “Would you give me money to do this or that?” And the companies would give small quantities of money with no perception of any strategic social transformation. It is still like this for most companies.
There is a second stage that I can see existing widely in Brazil that involves more strategic investment in which the company perceives that if it decides to invest in a certain area—but still private social investment—it may develop models that could be used on a larger scale. Some companies are doing that. The companies have partnerships with NGOs or they themselves establish their own social program and, at some point, there is an outside evaluation and systematization of what’s happening with these programs. It systematizes the learning and, in a few years, it’s possible to systematize the model. That model can be used by other people. Not an operational model that defines everything that needs to be done in a certain area, but a philosophical and contextual model that defines the basic elements that should be used in education, community relations, and health.
Some companies are doing that, and I think that’s one direction in which companies are going—in the direction of looking at social investment as a way, not only to show that they’re good corporate citizens, but as a way to establish good solutions for social problems developed under business-like approaches in which you look at results, you analyze impact, you analyze learning, and a model. It is a dynamic model that portrays the learning of the process and some of the best companies are going in that direction.
The third step that I can see in many companies is to really perceive social responsibility not as private social investment, but to perceive it as a much broader action in terms of the relationship to all of the stakeholders. In this step, the company from within tries to analyze what happens in these relationships by using, for example, Ethos indicators for social responsibility and saying, “Well, here I am a little bit better; here I am a little bit worse.” I would say that maybe 300 or 400 companies in Brazil are doing that.
The fourth step, and very few companies are in that step, involves dialogues with the stakeholders that I was talking about. There are few companies doing it, and doing it well. These are companies that are not afraid to be wrong; they’re not afraid that they’re not doing everything the way it should be done; they’re not afraid to expose themselves. They’ve humanized their own view about themselves, so they know that they will make mistakes and that, if it’s natural for human beings, so it is going to be natural for companies. There are maybe 40 or 50 companies in this stage in Brazil.
When we talk about other countries in Latin America you may take the example of Peru, for instance, in which you have very active organization in CSR. There is a certain number of businessmen following the same process I just described. In Peru, it has developed in last 10 years, they’ve used some of the things that Ethos developed, and they developed their own mechanisms. But at the same time, you have countries like Argentina, which is still very much behind in that process, although there are many organizations looking into it. It probably depends on the role of media, it depends on the problems of the economy that businessmen are facing—the more difficult the economy is for the businessmen the more difficult it is for the businessmen to look outside the business and to include CSR as part of the business.
The dialogue and the relationship of what they’re doing with stakeholders involved in the third and fourth step is very typical of businessmen that start to perceive that CSR is part of the business and that it is totally not only possible, but desirable to have CSR as part of the business because that will help in making the business more profitable. I’ve seen just recently some very interesting examples of a company that does ethical evaluations of what companies do in terms of CSR. They compared the ethical evaluation, with a certain system of measurement and so on, to the price of shares of companies in the market. It is totally correlated. They made a study with Walmart, Carrefour, and Tesco. They showed that, for example, the moment that Walmart picked up sustainability as something important and started doing concrete things to take sustainability ahead inside the company, the price of the shares started to grow. Just after [Walmart CEO] Lee Scott saw he was spending 90 percent of his time dealing with the reputation of Walmart, he said, “I don’t want to do this 90 percent of my time, so let’s deal with that in positive way, let’s take sustainability as a main issue.” It is impressive what’s happening there.
AS/COA: Can you talk about private and public partnerships and how you see these developing in terms of CSR going forward?
Mattar: I think there are two basic difficulties. In the public-private partnerships in CSR, the first one is that there is a tendency on the part of governments in general to think of themselves as regulators through law. Since governments are not very close to companies, the big difficulty is if a government decides to regulate CSR through law it would probably be a disaster because they would ask a lot from companies while not perceiving that CSR involves a changing culture in companies. By being a changing culture it is a step-by-step process, so it’s much more a process of recognition of what’s being done well rather than regulating and forcing situations.
The second difficulty is the distance between government and society in Latin America in general. Also, because of the authoritarian regimes that we had there was a separation between state, government, and society. In that, there’s also a difficulty in having government working toward CSR, because the government does not get close to society. Instead, a government is very much induced into actions by a specific interest in society, but not by the collective interest of society. When we talk about CSR we are talking about the collective interest of society; we are talking about returns to stakeholders, not only returns to shareholders. When you talk about returns to stakeholders, what’s basic for that is dialogue. And the government doesn’t have a dialogue with society. It is a vertical relationship between government and society. What’s not vertical is the influence of specific interests that finance electoral campaigns and then come to government to demand what has to be done because “I paid for it.”
AS/COA Online: Do you see any prospects of breaking through some of those challenges?
Mattar: I think it is a process to break that phenomenon, and the process, from my point of view, starts in society. The process is one in which you organize civil society and you start to establish common visions. Those common visions have to be taken to the government, then you establish a relationship between society and government at the same power level. This could lead to dialogue including companies, so the companies would be seen by government as instruments for social development and not only as tax generators and employment generators. That’s a big change in culture for government.
Republished with permission from the Council of the Americas.