ESG (Environmental, Social, and Governance) and Compliance are two essential concepts in modern business, and they are interconnected in various ways.
Environmental, social, and governance (ESG) issues are necessary for every company as they bring the principles of transparency and credibility. ESG compliance refers to a company's adherence to ESG practices that align with the values and expectations of its stakeholders.
Furthermore, a company's industry plays a significant role in determining which best practices are not only necessary to maintain the business but also for it to function effectively.
What is ESG?
ESG is an acronym that stands for Environmental, Social, and Governance, corresponding to an organization's practices. The understanding and application of ESG criteria by Brazilian companies are increasingly becoming a reality. Acting in accordance with ESG standards enhances the competitiveness of the business sector, both domestically and internationally.
In today's world, where companies are closely monitored by their various stakeholders, ESG is an indication of strength, lower costs, better reputation, and greater resilience amid uncertainties and vulnerabilities.
What is Compliance?
"Compliance" comes from the verb "to comply," which means to be in accordance with norms, laws, regulations, policies, and guidelines. Therefore, it is the corporate structure that ensures compliance with all of these and ethical relationships in business and institutions, as outlined in codes and principles.
ESG as a component of Compliance
Companies that incorporate the ESG pillars into their operations can reduce risks, fines, reputation damage, and regulatory issues. This is in line with risk management, which is an essential part of Compliance.
Thus, the relationship between ESG and compliance is directly related to the need for organizations to adopt more sustainable and responsible practices. These activities complement each other and positively contribute to the business, providing the company with much more credibility, reliability, transparency, and alignment with the expectations of its stakeholders.
In summary, compliance plays a central role in the strategy and execution of ESG actions due to its commitment to ensuring the integrity of information and contributes to the success of the ESG agenda not only in relation to the "G" (Governance) but to all the structures it permeates to reach all levels of a company. In this way, it aims to ensure the reputation and transparency of the organization not only to shareholders and investors but to all stakeholders, such as employees, customers, suppliers, and society.
How to ensure value for my company through ethical principles and good compliance practices?
The benefits obtained by companies in compliance are undeniable. Among them, we can list the improvement of the company's reputation in the market, increased valuation, greater openness to business (especially international ones), competitive advantages, attraction and retention of talent (employee-friendly companies), more available capital, and improved customer perception of companies.
A practical example of corporate governance is the need for joint decision-making for certain acts or the need for review, supervision, or authorization of malicious users and clients for acts that involve a considerable level of risk, such as scams and frauds. Tools like KYC (Know Your Customer) help in this process. By verifying user information, it reveals when entering into such a partnership could represent a risk to your business.
By hiring partners who also operate on ESG principles and remain compliant with laws and regulations relevant to their industries, your business protects itself from a range of threats that can negatively affect this relationship and your brand's image.
