ESG targets and relevance in companies

Metas ESG e a relevância nas empresas

With the expansion of ESG in organizations, companies begin to link executive variable compensation programs to the achievement of goals.

Part of the large Brazilian companies have already understood the importance and relevance of ESG goals within organizations. Increasingly, environmental, social and governance issues become priorities with internal changes and even compensation programs for executives linked to the achievement of goals.

The Boston Consulting Group (BCG) has shown that companies with superior performance in environmental, social and governance areas have higher valuation margins than those that are not concerned with incorporating ESG goals into their businesses.

According to a survey carried out by Fundação Tide Setubal and Instituto Silvis, 74.2% of entrepreneurs believe that ESG is a topic of high importance, with compliance being the most important issue for most respondents, with around 62.3%.

What is ESG?

One of the acronyms that gained more relevance in recent years was ESG. ESG refers to environmental (environmental), social (social) and corporate governance (governance) issues and in Brazil it is also identified with ESG.

In general, the issues addressed by the ESG are divided into: environmental, social and governance issues. The first one refers to the company’s practices on sustainability and the environment, such as reducing greenhouse gases and pollution, reforestation and recycling.

Social issues are related to social responsibility and the organization’s impact on the community and society, covering topics such as labor laws, safety at work, fair wages and social investment. Finally, governance is linked to the policies, processes and strategies that guide management to the best decisions.

Brazil was the Latin American country that most searched for the acronym ESG in the last 12 months and one of the 25 countries in the world that most searched for the theme in the period. This number shows how society and companies began to move, seeking to understand the importance of actions and how this was reflected in the market.

The importance of ESG goals within organizations

According to the Global Compact, ESG is nothing more than corporate sustainability itself. That is, a company that manages to develop by minimizing its negative impacts and promoting positive impacts on society, can be considered an organization that values ​​ESG.

With this in mind, Brazilian companies have already started to structure variable compensation programs linked to environmental, social and governance metrics. The practice, which is already an international trend, has gained space in large companies in the country.

According to a survey carried out for the ESG Practice by Mereo, of 149 large and medium-sized companies surveyed, 47 have already considered ESG in goals, indicators and methodologies and 35 already have some compensation program associated with ESG indicators. Among the 23 companies analyzed that are listed on the stock exchange, in Brazil or abroad, only ten have some form of remuneration based on ESG indicators, with the percentage varying from 10% to 20%.

In some companies, in addition to the leaders being remunerated for achieving goals, such as directors, managers and c-levels, there are already employees of the operation who also participate in the bonuses. The strategy is important as it creates a culture of continuous improvement, with the focus always on an objective set by the company following the ESG goals, generating responsibility in everyone for the achievement of good results.

Therefore, it is possible to identify that society and companies are becoming more mature regarding ESG goals, expanding their actions. If you want to better understand how to expand environmental actions by investing in energy, contact us.