ISG Provider Lens™ Sustainability and ESG - Strategy and Enablement Services - Brazil 2024

Despite less exposure in the media, several companies in Brazil are still committed to sustainability

The adoption of environmental, social and governance (ESG) sustainability practices by Brazilian companies has advanced in the last year. However, as highlighted in the second edition of the ISG Provider Lens™ study on Sustainability and ESG, there is still much potential for improvement. Continued technological evolution, along with innovations and public  policies aimed at ESG, remains crucial to strengthening engagement and increasing the effectiveness of these practices in the market.

Brazilian companies committed to sustainability have converted their discourse into effective practices, generating tangible impacts through their initiatives. For sustainability to become a long-term priority, it must be profitable,
creating value that transcends the costs involved; otherwise, sustainability efforts will be unsustainable. This strategic maturity has propelled these organizations to focus on designing and executing genuinely effective sustainability strategies, whose progress is measured on the basis of rigorous and wellestablished methodologies. As described below, extreme weather events recently observed in Brazil have also contributed to the private sector’s greater engagement in sustainability initiatives.

Conversely, some companies in the country have not moved beyond the desire to have a positive agenda. These companies neither organized themselves to have a sustainability plan nor did they adopt concrete measures to turn ideas into real actions. Some were more interested in the media exposure that ESG had gained. When the subject started to have limited visibility in newspapers, the engagement of these companies declined. Additionally, consumers and investors gradually began to acquire more knowledge and the necessary tools to differentiate between companies that were seriously investing in a green agenda and those that were merely publicizing initiatives that did not  generate value and practicing greenwashing.

Demand overview

Climate change continues to be in the spotlight as Brazil faces increasingly intense weather phenomena with serious consequences. In April 2024, Rio Grande do Sul was hit by one of the worst storms in history. São Paulo, the largest city in Latin America, has already faced storms, leaving millions of consumers without electricity for up to a week. Brazil has also experienced other extreme events related to high temperatures. In 2024, the country broke carbon emissions records as a result of forest fires that ravaged the nation and affected important Brazilian biomes such as the Amazônia, Cerrado and Pantanal.

The frequency and intensity of extreme weather events are increasing awareness among the Brazilian population about the need for concrete actions by the public and private sectors to mitigate global warming. Companies’ recognition of climate-related risks has also increased, and many are redirecting investment flows to invest in actions to identify and mitigate potential impacts in terms of operating costs, supply chain disruptions, and changes in the supply and demand of products and services.

Another significant trend revealed by this year’s study is the growing commitment of Brazilian companies to the principles of the circular economy, which aims to minimize waste and optimize the use of resources. Brazil has made progress in establishing new regulations governing this issue, aiming to boost technological innovation and increase
efficiency in using natural resources. These initiatives are complemented by tax, financial and credit incentive mechanisms and the promotion of sustainable purchases, including those made by public sector entities.

According to the Brazilian Institute of Geography and Statistics (IBGE), the search for social sustainability solutions is still limited, even in Brazil, where 31.6 percent of the population lived in poverty in 2022. One of the main challenges related to social issues is the difficulty of setting targets and the complexity of measuring and evaluating progress.
An attractive aspect of ESG initiatives is that, in addition to having a positive impact on society, they also have the potential to generate longterm economic value. However, it is not easy to quantify the financial impact of social projects, although this pillar is expected to expand in the future as companies become more liable for human rights violations in the supply chain.

Solutions for sustainability

Providers analyzed in this year’s survey have restructured their portfolios, consolidating and repositioning their offerings to focus on areas of greater relevance and growth potential to align with the market evolution and maximize
the impact of companies committed to ESG and sustainability. In contrast to the previous edition, which indicated the accelerated emergence of new digital solutions, the speed at which offers were launched this year was reduced, reflecting a market recalibration in response to real demand following a phase of initial overlap.

In Brazil, most providers focus on ESG services and solutions that mainly revolve around environmental sustainability, aimed at reducing carbon emissions, energy transition, resource management and optimization, and sustainable and resilient supply chains. Providers also develop customized solutions to meet the country’s unique challenges, including
strategies that address deforestation and land use, biodiversity and species at risk, and solid waste management, which are in line with the Brazilian context.

In Brazil, the application of technologies such as AI, generative AI (GenAI), automation, ML and IoT has intensified. This initiative aims to find solutions that promote sustainability and meet ESG demands. Through AI and ML,  providers automate and improve data collection, validation, standardization and analysis, developing modeling  methods to build and expand their datasets. These tools also help provide real-time data and projections, while GenAI contributes to the design of sustainable products from the inception stage. Automation has enabled efficiency in operations by minimizing energy consumption, and IoT has revolutionized the management of water and energy resources, with sensors monitoring water consumption and quality in real-time. Together, these technologies increase operational efficiency and strengthen companies’ transparency and commitment to responsible practices, promoting a
more sustainable future.

Regulatory environment should boost opportunities in Brazil

Brazil, as the host of the 30th UN Climate Change Conference (COP30), continues to make progress on the  sustainability agenda. The country recently approved a bill that promises to be a milestone for the circular economy and reducing the carbon footprint. The Fuel of the Future Law, as it was named, is considered one of the largest and most innovative projects for decarbonizing the transport matrix, positioning the country at the forefront of the global energy transition. The law creates three national programs as listed below:

● Green Diesel: This program aims to stimulate research, production, marketing and the use of biofuel.

● Sustainable Aviation Fuel: According to this program, starting in 2027, all airline operators will be obliged to reduce greenhouse gas (GHG) emissions on domestic flights through the use of sustainable aviation fuel.

● Decarbonization of Natural Gas Producers and Importers and Incentives for Biomethane: This program aims to stimulate research, production, marketing, and the use of biomethane and biogas in the Brazilian energy matrix.

The law also makes great strides in regulating the activity of capturing and storing carbon, with authorization from the National Agency for Petroleum, Natural Gas and Biofuels, guaranteeing legal certainty. Through the Fuel for the Future program, Brazil is expected to reduce the emission of 705 million tons of carbon dioxide by 2037, reinforcing the country’s commitment to carbon neutrality.

Brazil has immense potential for bioenergy, and the initiatives in this project should encourage the development of innovative technologies, creating business opportunities for suppliers and, consequently, stimulating the economy and income generation in the country. Such initiatives will also offer a new impetus to the circular economy, promoting projects to reuse waste from farming, forestry and landfill activities.

Next year, the government is expected to enact the New Sustainable Business Law, which will establish guidelines for integrating ESG practices into operations. These regulations should encourage companies to adopt sustainable practices through subsidies and tax benefits, positioning the country as a global leader in sustainable practices.

Access to the full report requires a subscription to ISG Research. Please contact us for subscription inquiries.