In this volume of the Europe-Brazil ECCON Letter, we will discuss the ESG (Environment, Social and Governance) practices as an instrument for reducing business risks and managing crises. We will also demonstrate the positive outcomes for a company’s reputation and profitability that can result from adopting such practices, while ensuring corporate compliance with various national and international regulations and fulfilling corporate social responsibility.
ESG Practices as a Tool for Risk Mitigation and Corporate Social Responsibility Compliance
The acronym ESG refers to three interlinked pillars that should be considered collectively. When implemented effectively, these practices help businesses become increasingly competitive, ethical, and human-centred. ESG strategies are capable of mitigating a broad spectrum of risks. Let us examine each in turn:
- Environmental: Efficient resource management in the face of climate change helps to minimise and/or compensate for environmental damage. The climate-related disasters we are currently experiencing pose a significant threat to industries, particularly as they affect agricultural output and disrupt the stability of global supply chains. Therefore, initiatives such as native vegetation restoration or reducing carbon emissions can help to reduce these impacts.
- Social: Adopting fair and inclusive labour practices that respect human rights; cultivating positive relationships with local communities to foster a supportive business environment; partnering with ESG-compliant suppliers; and offering sustainable goods and services to environmentally and socially conscious consumers—all serve to minimise litigation risks while strengthening brand loyalty and trust.
- Governance: Encouraging diversity and independence within boards of directors, coupled with strict compliance policies against harassment and illegal conduct, helps to prevent fraud, media scandals, reputational harm, and corruption. Transparency, integrity, and clear communication with stakeholders are also essential for effective risk and crisis management.
A sustainable business seeks to use natural resources only to the extent necessary to meet present needs, while preserving them for future generations. It is important to note that sustainability here is not merely environmental, but also social—it involves establishing an organisational culture in which labour, community, commercial, and social relations are founded on respect for human dignity and diversity.
This approach forms part of what is known as stakeholder capitalism, wherein companies aim to build long-term relationships by considering the needs of all interested parties and assuming responsibility for promoting social well-being. Within this framework, economic activity is measured against broader social goals and driven by collective stakeholder engagement in the decision-making process.
Hence, corporate social responsibility means not only fulfilling legal obligations but also proactively investing in human capital, the environment, and stakeholder relationships—upholding ethics, transparency, and human rights. This results in greater profitability, competitiveness, positive brand recognition, and the avoidance of legal and commercial risks.
ESG in Practice
A study conducted by McKinsey and Nielsen found that ESG-aligned products are more highly valued. The data below demonstrate that ESG-compliant businesses are more profitable and competitive:
Moreover, today’s market—including investors—demands that companies address their entire value chain. It is no longer enough for a corporation to adopt sound internal practices; it must also engage only with business partners who share the same ESG values. Associating with entities that engage in illegal and/or unethical practices can cause significant reputational harm and financial losses, as outlined below.
According to data from SVX Consultancy “In 2023, over 70% of companies listed on the B3 stock exchange had already implemented ESG policies, with expectations of surpassing 90% by the end of 2024. The financial sector also witnessed a surge in sustainable investments—assets under ESG fund management doubled from R$15 billion (2022) to R$30 billion in 2023, with projections to reach R$50 billion in 2024. Additionally, green bond issuance hit a record of R$94.5 billion in 2024, a 32% increase from the previous peak.”
ESG in the International Regulatory Landscape
These principles are fully aligned with international regulations. The Organisation for Economic Co-operation and Development (OECD) — of which Brazil is a signatory—establishes guidelines requiring responsible business conduct regarding human rights, labour rights, and environmental issues.
Since 2017, countries such as France, Norway (2022), and Germany (2023) have required large companies to implement and publish due diligence plans. These plans must outline measures to identify and prevent human rights violations and environmental harm arising from their own operations or those of subsidiaries, suppliers, and subcontractors. Furthermore, they must publicly report on these findings, including the impacts identified throughout their value chains and among their partners—in other words, they must manage their risks.
On 13 June 2024, the European Parliament introduced Directive 2024/1760 concerning corporate sustainability due diligence. This directive mandates that large companies establish processes to identify, prevent, and mitigate adverse impacts on human rights and the environment throughout their operations and supply chains.
In Brazil, the Securities and Exchange Commission (CVM) published Resolution CVM 193 in 2023. This allows publicly held companies, investment funds, and securitisation firms to voluntarily publish sustainability-related financial reports based on the international standards IFRS S1 and S2, issued by the International Sustainability Standards Board (ISSB). Brazil was the first country to adopt this framework.
Final Considerations
Being socially responsible requires corporate action both internally and externally. Within the company, it means promoting diversity among employees, ensuring a fair, mentally healthy, and safe working environment, and implementing productive processes that reduce negative externalities or even generate positive impacts—aiming to become a regenerative business that goes beyond mere compensation by delivering simultaneous environmental, social, and economic benefits to transform the entire business system.
Externally, companies must contribute to the development of surrounding communities—especially those most vulnerable; build a value chain in which all links share the same ESG goals; commit to upholding human rights in all relationships; and act to preserve natural resources with a global outlook. Such practices ensure better management of financial and reputational risks and help minimise the likelihood of crises.
ECCON has the expertise to assess companies and develop an ESG action plan —including those linked to the ‘Social’ pillar. Our services include risk-based due diligence, socio-environmental protocols, diversity and inclusion strategies, initiatives for engaging with traditional communities near decarbonisation projects, reputational reporting, and more — enabling companies to meet regulatory requirements (particularly given our operations and presence in Europe), reduce financial and reputational risks, and boost market competitiveness.
For more information, visit our website or contact us at: contato@ecconsa.com.br.
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Julia Maillet Rocha Lenzi
Tatiana C. Leite de Aguiar
Juliana Robles Tasca
Yuri Rugai Marinho
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