Brazilian Institute of Corporate Governance
Chairman of the Board of Directors
Vice-Presidents
Members
Officers
Superintendet-General
The Brazilian Institute of Corporate Governance (IBGC) is an organization dedicated exclusively to
the promotion of corporate governance in Brazil and is the main driver of practices and discussions
on the subject in the country, having achieved national and international recognition.
Founded on November 27 , 1995, IBGC – a national non-profit civil society organization – aims to be a
reference in corporate governance, contributing to the sustainable performance of organizations
and influencing key agents in our society towards greater transparency, justice and responsibility.
Gilberto Mifano
Alberto Emmanuel Whitaker and João Pinheiro Nogueira Batista
Carlos Biedermann, Carlos Eduardo Lessa Brandão, João Laudo de Camargo, Leonardo Viegas,
Maria Cecília Rossi and Plinio Musetti
Matheus Rossi, Ricardo Camargo Veirano and Sidney Tetsugi Toyonaga Ito
Heloisa Bedicks
For further information on the Brazilian Institute of Corporate Governance, visit www.ibgc.org.br.
To become an IBGC member, please call: +55 (11) 3043-7008.
Total or partial reproduction of this document is forbidden without formal authorization from IBGC.
th
159s Brazilian Institute of Corporate Governance
The Practice of Sustainability: Challenges experienced by corporate governance
agents / Brazilian Institute of Corporate Governance; coordination: Cibele de
Macedo Salviatto and Carlos Eduardo Lessa Brandão. foreword by José Luciano
Penido; foreword to the version in English by Mary C. Gentile; afterword by Jodie
Thorpe; Translation review by Jodie Thorpe. São Paulo, SP: IBGC, 2009 (Experiences
in Corporate Governance Series 1).
55 p.
ISBN: 978-85-99645-19-2
1. Corporate Governance. 2. Sustainable Development. 3.
Sustainability. I. Title. II Salviatto, Cibele de Macedo, coord. III Brandão,
Carlos Eduardo Lessa, coord.
CDD – 658.4
Librarian in charge: Mariusa F. M. Loução – CRB-12/330
Credits
This work was developed by the Sustainability for Companies Study Commission (CESE for its
Portuguese acronym), established by IBGC.
To the IBGC team, represented by Vera Marques and Henrique Nardini, and to Vânia Campion,
for supporting the CESE and for her contributions to the content of the document.
To those who, at the request of CESE, shared their comments and suggestions, especially to
Cynthia Rosenburg and Peter Harazim.
To the Board of Directors of IBGC and to the Superintendent-General, for their careful revision
and the suggestions they made.
To the seven interviewees who generously gave their time and shared their professional and
personal experiences: Claude Ouimet, Eduardo Bom Ângelo, José Luiz Majolo, Luiz Ernesto
Gemignani, Marcos B. Egydio Martins, Ralph D. Wehrle and Renata de Camargo Nascimento.
To José Luciano Penido for his kindness in writing the Foreword, to Mary C. Gentile for the
foreword to the version in English, and to Jodie Thorpe for her comments and for writing the
Afterword.
To Giovanni Barontini, for his comments on the first draft and for having suggested the idea of
approaching the training of governance agents by focusing on the individual and his or her
dilemmas.
Members of GESE who contributed to this document
Alberto Emmanuel Carvalho Whitaker
Álvaro Plínio Pureza
André Beleza Fontana
André Coimbra Felix Cardoso
Aron Zylberman
Cláudia Martins
Cristine Marian Naum
Cristine Zanarotti Prestes Rosa
Daniela Hollo Aiach
Diva Irene da Paz Vieira
Elisabeth Barbieri Lerner
Ewaldo M. K. Russo
Homero Luís Santos
Cibele de Macedo Salviatto
Carlos Eduardo Lessa Brandão (Coordinator of CESE)
Acknowledgments
Special Acknowledgment
Contributions
Coordination
Luciana Brenner
Maria Eugênia dos Santos Buosi
Paula Peirão Oliveira
Paulo Bento Maffei de Souza
Paulo Conte Vasconcellos
Paulo Vanca
Roberta Simonetti
Roberto Sousa Gonzalez
Rodrigo Pecchiae
Ruth Goldberg
Simone de Carvalho Soares
Vânia Bueno
Table of Contents
Foreword. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 06
Foreword to the version in english
Presentation
A word from the chair
. . . . . . . . . . 08
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 08
. . . . . . . . . . . . . . . . . . . . . . . . . . . 09
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.1. Recapping some concepts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.2. Dilemmas and challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.3. Values and principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.4. Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.5. Structure of the document . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
A Rocky road . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.1. Short term vs. long term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.2. Individual resistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.3. Organizational resistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.4. Business context and regulatory environment . . . . . . . . . . . . 25
Stepping Stones . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.1. Cultural shift . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.2. Corporate governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.3. Alignment, dialogue and communication . . . . . . . . . . . . . . . . . 34
3.4. Mapping and measuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.5. Creativity and innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.6. Commitment and conviction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
1
2
3
Call for reflection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.1. When the tool becomes the goal . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.2. Walking the talk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.3. Institutes and foundations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.4. Limits of action and leadership . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.5. The future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Afterword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Biographical references(profile of interviewees) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Biographical references . . . . . . . . . . . . . . . . . . . . . . . . . 49
4
5
6
7
6 Experiences in Corporate Governance
Foreword
I have always worked in industries related to basic materials obtained from nature,
first with mining and for six years with renewable plantation forests. As an executive, I
had the privilege of participating in the rapid evolution of thinking and practices of
organizations facing the challenge of securing the future of business. In Brazil, which
experiences such great inequality, I believe the business sector is learning fast and
building a successful concept of sustainability, in tune with the expectations of our
time.
In my youth and until the early 1970s, everything linked with industry represented
progress, enabling improved quality of life and ensuring people's welfare. The
promise of happiness in material wealth derived from economic activity had seemed
inexhaustible until the awareness started growing that it was necessary to change or
nature would be unable to sustain the indiscriminate demand for resources or absorb
the resulting waste.
Hundreds of millions of new consumers in the developing world began to have access
to levels of aquisition hitherto restricted to people in developed countries. It became
clear that human activity is already impacting the Earth's climate, intensifying the
effects of climate change and creating a worrisome burden on the so-called 'natural
capital'. Social issues are reappearing – generated by geopolitical conflicts, by
inequality in the enjoyment of the wealth created so far, and by the exclusion of more
than 1 billion people who still live in extreme poverty. And this is announcing hard
times ahead.
Today, the need for creative and innovative solutions which take account of our
common future gain a sense of urgency, both individually and collectively. But I see a
possible future. I think a revolution in individual and collective mentality is inevitable,
in order to better appreciate the simple things in life, non-material riches and
conscious consumption. New technologies will be developed for the production of
energy and goods that are renewable and recyclable. New public policies should
encourage this behavioral change, burdening, including with taxes, unreasonable
consumption levels, with emphasis on carbon emissions, water consumption,
conservation of natural forests and the expansion of planted forests, land and sea use
to produce food and other natural materials.
In the 1990s, at an event at the IFC in Washington, I heard from James Wolfensohn,
then president of the World Bank, that a successful corporation in this millennium
would be one that knew how to talk with society – high quality management
7Prefácio
standards, complying with legislation and maintaining environmentally responsible
activities would simply be prerequisites. To be sustainable and have a future, it would
be necessary to anticipate the expectations of society and create so-called 'social
value'. When I returned to Brazil, I saw the company over which I presided could and
should do more in this direction. And it would only be achievable if the theme of
sustainability were rooted in strategy and organizational culture.
Learning to listen and cooperate with others in search of harmonious solutions for
complex problems, involving seemingly irreconcilable interests and goals,
considering the short and long term, is one of our biggest challenges. Seeking to do
our part to better influence the collective destiny is already at the top of our agenda,
demonstrating consistency in our personal lives with the values we seek in
organizational strategy and setting an example for the new generation of executives
and for our children and grandchildren.
A valuable contribution to those who are engaged in this mission is to share
experiences and analyze them in a structured manner, as proposed in this publication
by the Brazilian Institute of Corporate Governance that I am happy to preface. In it we
see that overcoming difficulties and dilemmas in the decision-making process, by
bringing new perspectives to old problems, is the raw material for the evolution of
organizations and society.
Once again, I am optimistic. People want happiness, and so do companies. An ancient
eastern proverb says that we are all intrinsically and indistinctly linked to the air we
breathe, from which we get our oxygen and our vital energy.
As for the act of breathing that unites us, we are together in the desire to endure and
to grow. For this simple reason, I think we will know how to be wise enough to preserve
the greater good and the greater value that is life. Starting with, for example, the
wonderful daily miracle of photosynthesis and the huge untapped potential of our
forests, is perhaps one of the greatest strengths of our country and of the planet in
this vast, complex and urgent common task.
Jose Luciano Penido is chairman of the board of Fibria. He completed a degree in
Mining Engineering at the Federal University of Minas Gerais (UFMG), and was CEO of
Votorantim Celulose e Papel (VCP) from 2004 to 2009 and, previously, of Samarco
Mining for 12 years. He was vice president of the Industry Federation of the State of
Minas Gerais (FIEMG), and is director of the Center of Industries of Rio Grande do Sul
(CIERGS) and a member of the Board of Instituto Ethos.
8 Experiences in Corporate Governance
Foreword to the version in english
In the “The Practice of Sustainability,” the Brazilian Institute of Corporate
Governance has produced a rich and valuable source of insight and experience-based
suggestions to guide and inspire corporate leaders who wish to consider and commit
to sustainability in their professional practices.
Although the report provides a clear set of definitions and frameworks for
understanding the benefits, the challenges and the importance of sustainability as a
governing principle for successful corporations, its greatest contribution is the
inclusion of real voices from leading agents of corporate governance in Brazil who
share their commitment as well as their learning in the navigation of these
sometimes difficult waters.
The report is uniquely significant for its emphasis upon the role and impact an
individual leader can have, in both setting and changing corporate culture, so as to
foster sustainable environmental, social and economic performance; its inclusion of
positive stories of such sustainable leadership as exemplars; its identification of the
intersection of personal values with the principles of good corporate governance;
and its inclusion of specific tools and tactics to empower and enable others who wish
to exercise sustainable corporate governance.
These tools include the reframing of and responses to frequently heard arguments
against sustainability; tools for communication and dialogue; emphasis upon the
power of setting a broadly defined organizational purpose and creating metrics to
support sustainability positions; and an emphasis upon the need for leadership at all
levels of the organization.
These are all tools that resonate with the principles of the Giving Voice To Values
approach to enacting values in the workplace and I hope and expect this report will
generate organizational momentum and individual inspiration and empowerment
for realizing the goal of sustainability in Brazilian corporate settings.
Mary C Gentile, PhD is the Director of the Giving Voice To Value curriculum and
senior research scholar at Babson College. Her articles have appeared in Harvard
Business Review, strategy+business, BizEd, CFO Magazine, and Risk Management,
and she has written several books on ethics and diversity.
9Presentation
Presentation
The Brazilian Institute for Corporate Governance (IBGC) unveils a new series of
publications called .
A large portion of business publications are centered around companies. The
purpose of this series is to shift the focus to those who are ultimately the decision
makers. These decisions in the sphere of corporate governance are often subjective
and require judgement calls that are not always easy.
The discussion around embedding sustainability in business strategy, for example, is
a theme which can provide readers an opportunity to reflect and understand how
some of their peers deal with challenges of this nature.
We hope that this publication encourages readers to consider new directions and
ideas in the process of aligning business strategy and management with
sustainability, supporting your personal and professional development as corporate
governance agents, and promoting a more realistic and comprehensive, and
therefore more sustainable vision.
This is another initiative of IBGC as part of its effort to maintain its position as the
main corporate governance reference in Brazil.
Experiences in Corporate Governance
A word from the chair
The rationale for sustainability
Mauro Rodrigues da Cunha
A concept already widely used in business, sustainability touches all of us with its
difficulties and challenges in addressing the issue and embedding it in the day-to-day
life of companies.
Corporate governance agents are its first carriers, responsible for the dissemination,
persistence and continuity of sustainability, which today is a reality and conduct
necessary for the longevity of the organization.
IBGC, through events, courses and publications, has been engaged in this debate,
highlighting the importance of this theme and its relation with the world of business,
as opposed to a superficial view that still exists in the market and with certain
organizations and people who associate sustainability exclusively with marketing
and 'doing good'.
For the institute, sustainability differs from that. It derives from the conviction that,
defined by their statutes, companies have an unlimited duration and so business
decisions cannot be guided solely by timeframes of 10 to 15 years – the time
perceptible in a discounted cash flow – but should take into account the longevity of
the business. This is where the need arises to think about sustainability.
Through candid conversations with those at the forefront of implementing
sustainability, and dealing with its demands and challenges – how to justify its
adoption in terms of business logic and not let the theme be lost in the details of daily
life – this guide presents us with qualitative research and stimulates reflection. The
aim is to help us move forward in the discussion and improvement of organizational
practices and, in particular, in that which relates to decision makers: to people.
Former Chairman of the Board, IBGC
10 Experiences in Corporate Governance
11Introduction
Introduction
About 15 years ago, the relationship between companies and the
concept of sustainability was little more than the aspiration of a handful
of people who, because of an environmental or social cause, believed it
was possible for the business world to incorporate values which would
minimize the negative impacts caused by their operations. During this
period we witnessed the evolution of policies and practices, from a
philanthropic approach and/or one focused on eco-efficiency, towards
actions more embedded in the company's strategy, involving other
levels of governance as well as several stakeholder groups.
The experience of many companies shows that the task of embedding
sustainability themes into strategy and day-to-day management is
neither obvious nor simple, bringing to the forefront various challenges
and dilemmas faced by partners, advisors, executives and other actors
involved in this process. In this context, CESE (IBGC's Sustainability for
Companies Study Commission), following the
, which presented the theme in a conceptual and
comprehensive form, chose to examine in more depth the nature of
these challenges from the practical experiences of those who face them.
As a group of professionals working in diverse areas of sustainability
and, specifically, corporate governance, we realized that this discussion
in institutionalized form, i.e. on the basis of the corporation as the agent,
has limitations. Corporations do not think or feel or act. These are
attributes of people. Thus one of the difficulties of introducing a
sustainability process within companies lies precisely in the human
dimension. Individuals are the ones who make choices, who are
motivated or not, who decide but face resistance and who relate to each
other.
Therefore, we invited corporate governance agents, such as
shareholders, investors, advisors and senior executives, to give their
personal testimonies of dilemmas experienced while trying to fulfill the
commitment to financial and economic results, and at the same time, to
embed sustainability in their companies. Each in their own way shared
with us their motivations and personal beliefs, their frustrations,
successes and what they learned along the way, including their visions
of the world. Our work was to listen, ask, compile, analyze, identify
Sustainability Guide for
Companies1
1.
1 See IBGC, 2007.
CORPORATIONS
DO NOT THINK OR
FEEL OR ACT. THESE
ARE ATTRIBUTES
OF PEOPLE
12 Experiences in Corporate Governance
IS IT POSSIBLE
FOR INDIVIDUALS
TO PLAY THEIR
ROLES IN ALIGNMENT
WITH THEIR PRINCIPLES
AND VALUES, EVEN
WHEN PROFESSIONAL
SITUATIONS REQUIRE
SEEMINGLY OPPOSITE
ACTIONS?
common themes and transform this material into a publication that
would serve as an inspiration and reference for those who are or will
find themselves in similar situations.
This work deals with the gap that can exist between people as human
beings and the role they play in the organizational environment, and
with the challenge of bringing personal values into companies. What
should one do when the rules of the game or even the survival of the
company (or his/her survival in the company) indicate a different and
conflicting direction with one's values. Is it possible for individuals to
play their roles in alignment with their principles and values, even when
professional situations require seemingly opposite actions?
The analyses were carried out in such a way as to preserve the identity
of the interviewees and the confidential issues of the companies
involved. The text marked with quotes and italics refers to the
comments of interviewees, reproduced as faithfully as possible.
The final product represents our understanding and positioning with
respect to the interviews, and not the details of the interviews
themselves.
Below are some definitions used in the document, as well as the
methodology used in its preparation.
2
2 Wherever we are referring to an individual that we interviewed, we will use the term “interviewee”.
Figure 1: Focus of the report.
Source: Developed by IBGC.
alingment with
SUSTAINABILITY
CORPORATE
GOVERNANCE
environmente
COMPANY
context
INDIVIDUAL
13Introduction
Recapping some concepts
Below are some concepts from the
, which presented the theme of sustainability from the point
of view of corporate governance.
In economic terms, sustainability means to live from the "income"
provided by nature and not from its "capital", the so-called “natural
capital”. All economic activity depends on this natural capital.
Natural capital is responsible for the provision of environmental
services, i.e. benefits that humans get from nature, such as: oxygen
production, carbon sequestration, soil formation, water, wood and fiber
supply, climate regulation, and aesthetic, spiritual and leisure value.
Social capital, in turn, is associated with social stability and prosperity
and is fundamental to the pursuit of sustainability. The concept of social
capital used in this document is associated with the quality of
relationships between individuals and groups in society, with trust being
an essential factor.
Corporate governance is the system by which organizations are
directed, monitored and incentivized, involving the relationships
between owners (shareholders), boards of directors, executives and
control structures. Good corporate governance practices convert
principles into clear recommendations, aligning interests with the aim of
preserving and optimizing the organization's value, facilitating its
access to resources and contributing to its longevity. The source of good
corporate governance practice lies in four basic principles:
Transparency, Equity, Accountability and Corporate Responsibility.
One good corporate governance practice is that the board of directors
provides the strategic direction for the company. In the development of
business strategy, both short- and long-term aspects need to be
considered. Specifically with regards to the latter, sustainability themes
Sustainability Guide for
Companies
The Concept of Sustainability
Corporate Governance and Sustainability
3
4
1.1.
3 Prosperity” is not necessarily associated with unlimited economic growth or other forms of human action that,
although generating economic value, put at risk the quality and continuity of life. With respect to companies, in order
to be viable and lasting, companies depend on well-functioning social and environmental systems, of which they form
a part.
4 IBGC 2009.
THE CONCEPT OF
SOCIAL CAPITAL
USED IN THIS DOCUMENT
IS ASSOCIATED WITH THE
QUALITY OF RELATION-
SHIPS BETWEEN INDIVI-
DUALS AND GROUPS IN
SOCIETY, WITH TRUST
BEING AN ESSENTIAL
FACTOR
14 Experiences in Corporate Governance
GOVERNANCE,
STRATEGY AND
SUSTAINABILITY
ARE INSEPARABLE.
STRATEGY PLANNING
SHOULD NO LONGER
TAKE PLACE WITHOUT
TAKING SUSTAINABILITY
ISSUES INTO
CONSIDERATION
must be taken into account. Therefore, logically, governance, strategy
and sustainability are inseparable. Strategy planning should no longer
take place without taking sustainability issues into consideration.
As result of its direct benefits in management and in facilitating access
to capital, good corporate governance is being rapidly assimilated by
companies, and therefore may function as a "gateway" to sustainability
in the corporate environment. In addition, it can also act as a “guardian”
of the alignment between the company and sustainability.
The relationship between major drivers of economic value and
sustainability aspects can be illustrated using a matrix:
5
Sustainability Matrix
Figure 2: Sustainability matrix.
Source: IBGC (2007, p. 21)
Actions
Business Success Factors
(economic value)
Revenue and market access
Commitmente with
sustainability
Principles,
purpose, vision
Corporate
Governance
Engagement of
other stakeholders
Products, processes,
business models
Relationships, impact acknowledgement,
and dialogue with respectNature of the operation
Sustainability Factors
Cost eficiency and
effectiveness and productivity
Assets management
Tangible
Intangible
Risk management
Licence to operate
Human capital
Brand
Reputation
Outcomes
15Introduction
The stages of sustainability
According to their response to both external (current laws and
regulations) and internal (integration of sustainability in the strategy or
the mission and principles of the company) stimuli, companies may be
classified as being in different stages of sustainability:
5 Based on the Foreword by Mervyn E. King, in the (IBGC, 2007).
6 English terms from Badaracco Jr., 1998 (in the Portuguese version).
7 Machado Filho, 2006.
8 Based on Lobos, 2003.
Sustainability Guide for Companies
Dilemmas and challenges
The decision-making process involves judgments that are based not
only on technical but also ethical aspects, such as principles and values.
Some decisions generate so-called ethical conflicts, which may be
divided into: problems (ethical decisions) , when the right thing to do is
difficult, and dilemmas (defining moments), when any decision will end
up violating some ethical principles.
A few examples of dilemmas of an ethical nature :
Immediate gains are put ahead of prudent and lasting investments;
Individual gains rival community interests;
Being honest within oneself requires breaking commitments to
other (s);
Applying the law calls for sacrifices.
6
7
8
I
II
III
IV
1.2.
Regulatory pressure
Stage 1
Pre-compliance Compliance Beyond
compliance
Integrated
strategy
Purpose &
passion
Stage 2 Stage 3 Stage 4 Stage 5
Eco-efficiencies
regulatory threat
public relations crisis
Business opportunities
risk management
Passionate
founder/chairman/CEO
Figure 3: Stages of sustainability in companies.
Source: IBGC (2007, p. 24)
16 Experiences in Corporate Governance
9 Chapter 5 contains a brief biography of each interviewee.
Values and principles
Methodology
Within the scope of this document, values and principles are linked to an
orienting philosophy of life, i.e. precepts that guide each person's
business and personal conduct. They are demonstrated by our acts and
not our words.
To develop a text based on the dilemmas faced by individuals, the group
felt it would be necessary to obtain original testimony from corporate
governance agents, since this type of information is not readily
available.
Faced with limited time and resources, and in order to obtain greater
details of individual experiences, we opted to undertake qualitative
research, i.e. based on a smaller but representative sample of IBGC's
target audience.
The criteria for selecting interviewees were based mainly on identifying
individuals who had:
A track record of attempting to embed sustainability issues in their
organization's strategy and operations;
Served at various levels of corporate governance (equivalent to that
of IBGC's target audience).
Seven people who work or worked in the field of corporate governance
were interviewed :
Shareholder of a family-owned business: Renata de Camargo
Nascimento;
Investor and chairman of the board: Ralph D. Wehrle;
Board member and CEO: Luiz Ernesto Gemignani;
CEO: Eduardo Bom Ângelo;
CEO and VP of operations: José Luiz Majolo;
VP of operations: Claude Ouimet;
Corporate, voluntary sector and government director: Marcos B.
Egydio Martins.
9
>
>
>
>
>
>
>
>
>
1.3.
1.4.
PRINCIPLES
IBGC has developed its Code
of Best Corporate Governance
Practices based on principles.
In other words, although
practices may change, the
basic principles of
transparency, equity,
accountability and corporate
responsibility tend to endure.
17Introduction
The interviews followed the steps listed below:
Pre-interview, explaining the purpose of the work;
Confirmation of invitation in writing detailing key interview
questions;
Signature of a Confidentiality Agreement by all involved;
Audio recording, when available and authorized by the interviewee;
Interview conducted at IBGC's headquarters, during ordinary GESE
meetings led by one of the members of the group, ensuring
coverage of key questions which included:
> Description of situations of conflict or individual challenge,
including their context,
> The interviewee's role in each situation (mandate, professional
and personal expectations),
> Development of conflicts (difficulties, approaches),
> Outcomes, the interviewee's personal impressions ("how they
felt" during each situation),
> Consequences with respect to the initial situation,
> Recommendations, lessons or suggestions ("what to do" and
"what not to do");
Discussion of the interview within GESE.
The text was developed as follows:
A fundamental premise was to not reveal the interviewees or the
companies they represent – which is why the quotes throughout the
document do not indicate the source.
Two members of the GESE were responsible for writing the text,
receiving and incorporating suggestions from others, including
from the secretary-general and board of directors of IBGC and some
invited experts (restricted consultation).
Interviewees were given the opportunity to review the final text, with
absolute right to veto any mentions of their names and/or the
companies they represent.
Additional care has been taken with respect to sponsorship of this
publication: companies linked to interviewees were not considered for
sponsorship.
>
>
>
>
>
>
>
>
PRINCIPLES &
TRUST
>
>
Given the dominant corporate
culture, in which people are
rewarded mainly by productivity
- which in the present context
means ever higher growth rates,
Mark Egydio shared several
situations and dilemmas for
which staying true to principles
was crucial, in order to make
decisions that benefit the
various actors involved.
"In the current context in
which we live and must survive,
being competitive is crucial.
Thus, greater care must be
taken to avoid hypocrisy. We
have to build relationships of
trust within organizational
cultures, in which expectations
are agreed upon and the rules of
the game are clear to all
involved. "
18 Experiences in Corporate Governance
Structure of the document
This document is divided into three parts.
In the first ("A rocky road"), we point out some of the most common
challenges experienced by the interviewees.
In the second ("Stepping stones"), we illustrate in the context of each
interviewee how these challenges could be treated and addressed,
organizing them into six paths.
Because of its nature, the document does not allow for an objective
conclusion. Thus, the third and final part (“Call for Reflection”) raises
some general issues in order to stimulate additional reflection by the
readers.
1.5.
A rocky road
The compilation of interviews identified some common challenges
and dilemmas among interviewees. Four macro-issues emerge,
which reflect the main challenges experienced by these individuals
when they tried to incorporate sustainability in their professional
lives.
2
22 Experiences in Corporate Governance
HOW IS IT
POSSIBLE
TO INCORPORATE
SUSTAINABILITY
METRICS IN DAY TO
DAY BUSINESS IN A
MARKET DRIVEN
BY THE YEAR-END
BONUS?
Sustainability, as the term itself suggests, is particularly related to the
long term. However, in both corporate and political contexts, the quest
for immediate results has been the name of the game. Accordingly,
balancing short-term gains with a company approach more related to
sustainability stands out as a major challenge. It was frequently
reported that the pressure for short-term results, either from
shareholders, or investors, or even executives motivated by their
annual bonuses, risked undermining efforts towards more responsible
strategies.
We noted that those who work in companies in more mature stages of
sustainability have less difficulty in justifying actions that run counter
to immediate profits . We heard of dilemmas experienced by several
interviewees when facing the decision of whether or not to participate
in projects that conflicted with their personal values, and realized that
giving up these projects is easier when the company is already at a more
advanced stage, though still not without effort from the individuals
concerned: "
"
We also realized that adopting a long-term vision contributes to the
process: "
"
There are conflicts of this nature even in companies which have already
developed initiatives that go beyond legal compliance: "
" or "
"
10
11
I never doubted what I had to do, however, it was verydemanding, since people had doubts and needed to be convinced.
We left the project because we understood that by doing so,we were creating more value in the long term than the few million reais[Brazilian currency] that we would make in the short term.
It is because ofthe bottom line that a CEO is maintained. It is very difficult to introducesustainability in the board agenda How is it possible to incorporatesustainability metrics in day to day business in a market driven by theyear-end bonus?
Short term versus long term2.1.
10 See figure 3.
11 For listed companies, this includes short-term share prices.
23A rocky road
Since it is people that make organizations what they are, issues
involving the individual, their personal resistance, fears and mental
models naturally surface as impediments to the integration of
sustainability.
One of the first issues to emerge is related to individual resistance,
which may come from fear of the unknown, or even from a certain
arrogance towards what is known: "
". When it
comes to change and innovation, in general "
" In this context, leaders who have yet to " " are
identified as one of the greatest obstacles: " "
is what one of the interviewees heard during his day.
It is from comments like this that the second issue or sustainability
dilemma at the individual level arises: Is it possible to link personal
beliefs to business? "
", one of them said. Would personal values be
compatible with the needs of companies, with respect to their
performance and competitiveness? It is very common to think that
companies face a dichotomy: to be socially and environmentally
responsible or to be profitable. The idea that it is impossible to reconcile
values and principles with business performance leads to comments
such as: " ", as one colleague of one of the
interviewees said when hearing of the company's new social and
environmental policies.
It should be stressed that, when speaking of personal values, we refer to
respect, honesty, integrity, compassion, respect for life, moderation and
responsibility, among others, which are aligned with the four basic
principles of good corporate governance. These, in turn, "
"
Therefore, the belief that personal values cannot be fully practiced in
What is disturbing is not [only] whatwe don't know, but that which we [think we] know for sure
people don't like it andprefer to maintain the status quo, because they believe it to be lessrisky. buy into the idea
We're here to earn money
There was a dichotomy between personal andprofessional visions
this will sink the company
are present inthe context of corporate sustainability, as long-term strategy, riskmanagement, consideration of intangible aspects, quality of stakeholderrelationships and responsibility for acts and omissions that, sooner orlater, could impact the company's economic value. 12
DEFINITION OF ROLES
AND MANDATES
RALPH D. WEHRLE highlighted the
importance of good corporate
governance in promoting a new
approach to the management of
projects under his
responsibility. The definition of
the role of each corporate
governance agent is
fundamental: "investors invest,
executives execute and reports
organize."
Individual resistance2.2.
12 See section 1.2 of the (IBGC, 2007).Sustainability Guide for Companies
24 Experiences in Corporate Governance
If on the one hand individuals and their beliefs form part of the
organizational culture, this culture also has an impact on individuals.
One of the interviewees explained that he began to assimilate the
company's culture once they understood the coherence and benefits of
a more responsible approach to management.
In some situations the existing culture places restrictions on individuals
who do not feel authorized to exercise their personal values. It is the
fear of the unknown already mentioned, but now as an integral part of
the company's organizational culture. To take measures considered
heterodox in a particular business environment can generate strong
resistance and lead to " ” or even more drastic
consequences. For individuals to have the freedom to act differently,
the company's culture needs to allow it. Note that some respondents
acknowledged their personal satisfaction and relief (“
") when they realized they were in organizations where
they felt authorized and encouraged to exercise their personal values.
Another source of resistance, which may be related to culture, is the
difficulty of dealing with differences in values, opinions and interests.
As the search for faster and more concrete results predominates, the
practice of involving various stakeholders in the planning or execution
of a process is seen as slow and inefficient. Balancing the interests of
various stakeholders is an enormous and draining task. For example, in
order to improve the functioning of the ombudsman's office at a
company with a culture unaccustomed to listening, one of the
interviewees was instructed to provide any sort of partial solution to
clients without dealing with the causes of the problem.
In this context, the lack of alignment and involvement of the leadership
with the issue of sustainability seems to be the main challenge. It is
much more difficult to initiate a process of change in an organization if
the leadership is not adequately involved: "
strategic retreat
a meeting withmy inner me
Changing culture leads tounpopular measures which do not necessarily sit well with the culture of
Organizational resistance2.3.
business is a clear contradiction with the essence of good governance.
Nevertheless, this seems to be the belief of many individuals and drives
the organizational culture of many companies, which the interviewees
see as a major obstacle to the inclusion of sustainability.
25A rocky road
Cultural issues, which generate resistance, can also come from outside
the company, for example, from the value chain: "
". In this case, the dilemma is between, on the one
hand, being competitive and selling a project in line with the client's
wishes and, on the other, acting in a way that is more sensitive to social
and environmental issues. Other examples point to resistance within
industry associations, which see the company's changes as a threat to
sector as a whole. "
"
All interviewees found it difficult to deal with practices in sectors that
are partially 'informal', since those who decide to comply fully with the
law face an initial disadvantage. In certain cases, acting at all times in
accordance with ethical principles inspired by sustainability may mean
going out of business. The question arises: is quitting the business and
stopping trying to improve the business environment the best solution?
What would be more sustainable? This dilemma leads some to believe
that " ", says one of
the interviewees. There are other concerns related to survival that,
apparently, impede more responsible practices: "
"
There are also situations in which legislation itself presents some
limitations, either by obsolescence, excess bureaucracy or even
inconsistency with more responsible practices. In such cases the
dilemma is with the decision to comply with the law. We see examples of
people who face lawsuits arising from initiatives that were absolutely in
line with their ethical principles, but not necessarily in accordance with
the existing legislation.
Clients often comewith a set demand that does not translate into the best social orenvironmental solution
The first time we talked about this [environmentalissues] with a industry organization, the reaction was not good, sincethere was a fear it would draw the attention of regulators and create aproblem for all.
in emerging markets sustainability comes afterwards
Managing a companymeans making choices between possible alternatives, and not always inaccordance with the company's ideal.
Business context and regulatory
environment
2.4.
the shareholder
they are alreadyahead of the game commercially
". On the other hand we see that even when the
shareholder is convinced of the need for sustainability management,
convincing executives of the need to change when "
" is difficult.
THE FIRST
TIME WE
TALKED ABOUT THIS
[ENVIRONMENTAL
ISSUES] WITH A
INDUSTRY
ORGANIZATION, THE
REACTION WAS NOT
GOOD, SINCE THERE
WAS A FEAR IT
WOULD DRAW THE
ATTENTION OF
REGULATORS AND
CREATE A PROBLEM
FOR ALL
26 Experiences in Corporate Governance
It is a common dilemma, since following the law sometimes requires
sacrifices: "
" In this
case, the lawyers of those accused of corruption found a loophole in the
law, which ended up causing the dismissal of the interviewee.
It is clear that the business context and legal environment can limit
more sustainable practices, be it of a company in its market, or a
governance agent in a company. It is crucial, however, that independent
of the decision being taken, we are ready to assume full responsibility
for its consequences.
As head of an anti-corruption process in a particular company,I acted according to my principles, but ended up being prosecuted. Butmy conscience is clear, because I did what I believed was right.
IT IS CLEAR
THAT THE
BUSINESS CONTEXT
AND LEGAL
ENVIRONMENT CAN
LIMIT MORE
SUSTAINABLE
PRACTICES, BE IT OF
A COMPANY IN ITS
MARKET, OR A
GOVERNANCE AGENT
IN A COMPANY. IT IS
CRUCIAL, HOWEVER,
THAT INDEPENDENT
OF THE DECISION
BEING TAKEN, WE ARE
READY TO ASSUME
FULL RESPONSIBILITY
FOR ITS
CONSEQUENCES.
Stepping stones
Many of dilemmas and conflicts reported here had outcomes that
generated learning. We grouped the themes that emerged into six
paths.
3
30 Experiences in Corporate Governance
ONE IMPORTANT
LESSON LEARNED
IS THAT THERE IS NO WAY
FOR A COMPANY TO
ALIGN ITSELF WITH
SUSTAINABILITY
WITHOUT ALSO
PROMOTING A
COMPATIBLE
ORGANIZATIONAL
CULTURE
Individual and cultural resistance inside and outside of companies was
identified as an obstacle in the path of sustainability. Therefore, actions
that seek alignment, understanding and development of people are
crucial in the process of embedding sustainability into company
strategy.
One important lesson learned is that there is no way for a company to
align itself with sustainability without also promoting a compatible
organizational culture. We learned of one executive's experience with
shareholder dissatisfaction with company results. His assessment
pointed to a cultural issue that he called "
”, i.e. executives were used to and satisfied with the
justifications for their poor performance and this was already part of
the company's culture. The solution was to work on changing the
management approach, a process that took at least five years to show
results. However, the results generated were very satisfying, both in
increasing internal awareness and in financial performance: "
.
We noticed that the most significant cases of incorporating
sustainability happened in companies where the culture allowed it: "
", says an executive referring to a company that could be
classified in one of the more advanced stages of sustainability from
Figure 3. He added that the culture prevailing at the time had a greater
focus on ethical objectives than on business growth. And, as
consequence, they experienced an increase in business turnover, once
the perception of risk generated outside of the company had
diminished, as they ended up attracting customers who identified with
this culture.
However, organizational culture is not something imposed; it is
constructed and maintained through coherence: "
." And he continues:
"
"
satisfactory under-performance
Byknowing how to deal with resistance and being persistent, peopleincrease their chances of being successful and happy
Thecompany was already oriented towards collective rather than individualresults
Sustaining culture inthe long term depends on each decision, which must prioritize long-termobjectives, at the expense of immediate resultsMoments of crisis don't justify ignoring values." "It is important that
values such as integrity and respect for relationships are reflected ineach action, in each decision of the company.
Cultural shift3.1.
31Stepping stones
CULTURAL
CHANGE
HAPPENS AT THE
LEVEL OF THE
INDIVIDUAL AND IT
IS VITAL THIS WORK
EXISTS IN ORDER TO
INFECT THE REST OF
THE ORGANIZATION
We identified four crucial issues related to the construction of an
organizational culture conducive to embedding sustainability:
There was consensus among the interviewees that change needs to
start with individuals. "
."
Following this same line of thought, another interviewee says that in
order to address the difficulties of spreading the concept of
sustainability in his company, it was necessary to emphasize individual
work, starting with his own, noting his own resistance and limitations,
and then moving onto the other leaders. "
", and there must be balance between personal and
professional life: "
”
We heard the story of a project in a city where the workforce was
believed to be technically unqualified and, for this reason, all ventures in
the region were believed to be adversely affected by poor customer
service. Through an 'inside out' transformation, the project was
developed with maximum involvement and respect for employees,
becoming a model of customer service excellence: "
" “
" And he adds: "
"
We heard in many testimonies that cultural change does not happen
overnight and that it is necessary to persevere in the process. Change is
slow and gradual, but this seems to be the safest way. "
", recommends an
interviewee, while another adds: "
"
Change starts from inside out – from the individual to the
organization and from the organization to the value chain.
It is a process that takes time
It begins with us, in our feelings and emotions, inthe way we relate with the world. We need to change ourselves beforeattempting to change the company or the world
Cultural change happens at thelevel of the individual and it is vital this work exists in order to infect therest of the organization." "You must take your personal values to thecompany
How can people who are not balanced make balanceddecisions?
Respectedemployees respect the customers. Change occurs by example and bydiscussion of the concept. Everything, absolutelyeverything, must be previously tested in house.
The time requiredfor the changes to occur must be respected
Change happens throughdetermination – the expansion of awareness is slow and gradual.. .and itmust have continuity.
a)
b)
32 Experiences in Corporate Governance
RELATIONSHIPS
BETWEEN PARTNERS
A company that belongs to a
holding group composed of
members from different
countries and industries (a
state owned institutional
investor and private owned
operating company) requires
complex governance. In a
scenario like this,
stressed the
"importance of Corporate
Governance to coordinate
such different partners."
EDUARDO
BOM ANGELO
One example that gives a concrete idea of the time required: "
In spite of the need for long-term change, it is very useful both to
establish intermediate goals to provide a sense of progress, and to start
with the practices that are easiest to implement. Each step in the right
direction should be celebrated; not only the final and long-term result.
" In addition, one executive recommends
that this vision of sustainability becomes, as a priority, "
", in order to maximize the number of
people and areas aligned with sustainability.
This issue was raised unanimously. The involvement of leadership is
crucial to start and advance the process of cultural change. One of the
examples tells of the importance of work at board level so that the board
could engage in dialogue about sustainability. "
”, says one interviewee when stressing the importance of
leadership involvement. “
”, in other words, to prepare them to see the
business context as being much more extensive. We also heard that for
culture to spread within the company, "
", so that changes are not dependent on
one or another leader.
It took us15 years to change our way of thinking." "But we must celebrate theprocess, because the results will come in the long term.”
In order to change we must stop seeing only the parts and begin to seethe whole. You can't separate the concept of sustainability from theconcept of systems thinking…, you need a paradigm shift in which thereis the possibility of inclusion of all human beings, all species inhabitingthe planet and future generations. We need to be part of the solutionrather than part of the problem.
somethingsystemic within the organization
Change happens byexample
It is important therefore to prepare leaders todeal with sustainability
it is necessary to train leaders – tocreate leaders at other levels
It requires a systemic vision
It needs the involvement of leadership
"
c)
d)
33Stepping stones
WE MUST
ALWAYS
HOLD OURSELVES
ACCOUNTABLE, EVEN
AT THE HIGHEST
LEVELS. THIS TYPE
OF APPROACH CAN
HELP THE COMPANY
DEVELOP A MORE
RESPECTFUL ATTITUDE
TOWARDS ITS MANY
STAKEHOLDERS
The importance of good corporate governance in the process of
embedding sustainability was very clear. One of the examples of a
company which is reaching level 4 in Figure 3 shows that its positive
evolution stems from the initiation of sustainability at board level, with
the board's own constitution, revision of roles and the alignment of
board members with the theme. The interviewee who brings this
example indicates that good corporate governance practices are
important in spreading values and contributing to the required cultural
change within companies, because they originate from the leadership.
Another interviewee says that the "
We also saw an example of a company in which the strategy included the
simplification of board meetings, the creation of an advisory council, the
strengthening and establishment of committees and the deployment of
an ombudsman.
On the other hand, one of the interviewees highlighted that "
", showing that when this happens,
the process loses credibility.
The development of business with partners led one of the interviewees
to recall the expression ". This
illustrates a critical point in terms of good corporate governance: we
must always hold ourselves accountable, even at the highest levels. This
type of approach can help the company develop a more respectful
attitude towards its many stakeholders
use of good corporate governancewas instrumental in changing the company's management model.Furthermore, the basic principles of good governance – transparency,equity, accountability – were invaluable throughout the process. Youmust have a clear concept of ethics and handle all changes with greattransparency.
manythings are decided at a very high level [board of directors] withoutsustainability being part of the filter
One who has a partner has a boss
"
“
.
Corporate governance3.2.
34 Experiences in Corporate Governance
STRATEGY
When the scope of business
activity expands, it is often
necessary to establish
subsidiaries with corporate
structures suitable for their
purposes, adding an
additional level of complexity
to business administration.
is an
executive from a group with a
unique ownership structure:
the staff of the group are the
sole shareholders of the
holding company, Promon SA.
In this environment,
"adopting good corporate
governance practices, such as
boards of directors and
external advisors, is essential
to provide clarity in defining
the scope of the strategies of
the various entities, and
independence in their
formulation and
implemention"
LUIZ ERNESTO GEMIGNANI
Sustainability also relates to organizational culture and the way of doing
things. Working on the culture is, consequently, essential, and this starts
with the individual, with the support of leadership and good corporate
governance practices. But how do we do this? One path indicated by the
interviewees is through dialogue and communication.
". In addition, the process was
augmented with campaigns and lectures on various themes, such as
carbon neutrality, conscious consumption, etc., geared to internal and
external audiences.
Communication and dialogue emerge as ways of aligning concepts,
sharing ideas and valuing diversity: "
” It is important to emphasize that communication and dialogue
should involve the relevant stakeholders as a way of balancing
relationships: "
"
”. One of the measures for evaluating stakeholder dialogue is to
find out its reach and at what level of the organization it happens. "
", one
interviewee says, adding, with respect to partnerships, "
”
Dialogue is seen as a path towards reflection and resolution of
dilemmas. One interviewee tells us about his experience in a company
that is already advanced with regards to Figure 3: "
"
The power and influence of companies can sometimes interfere in this
relationship model, undermining genuine dialogue. In other words, in
addition to involving various stakeholders in the dialogue, there must be
mechanisms to ensure a balance of power in engagements or
partnerships between companies and their stakeholders.
"
"
We held periodic meetings with all employees in which our main focuswas to be accountable and present our proposal, what we expected andhow they would benefit if it succeeded
Communication is a two-waystreet.
Thinking of only one stakeholder is a risk for sustainability,since you create problems with others – without a doubt, companies thatinvest in balanced relationships perform better.
We must align stakeholders' interests with transparency, equity andaccountability as a way to generate value and contribute to the process ofchange
Itshould go from operational teams to executive and board levels
it's necessary tohave respect and dialogue.
Sustaining the culturein the long term is affected by each decision. As it is not always possibleto define what is black and what is white, discussions take place withineach project and each proposal.
Alignment, dialogue and communication3.3.
DIALOGUE
IS SEEN
AS A PATH TOWARDS
REFLECTION AND
RESOLUTION OF
DILEMMAS
35Stepping stones
THAT
TOOLS
WHICH SEEK TO SET
SOME PARAMETERS
FOR SUSTAINABILITY
PRACTICES HELP IN
CONVINCING AND
ENGAGING MORE
SUPPORTERS IN THE
ORGANIZATION
HOWEVER, IT IS WORTH HIGHLIGHTING THAT NOT EVERYTHING IS "TANGIBLE" OR "MEASURABLE"
AND OBSTINATELY TRYING TO MEASURE EVERYTHING CAN LEAD TO MISTAKES
As to the term "dialogue" itself, it goes beyond formal rituals of
stakeholder consultation, often made with predefined agendas and
without the necessary intention of considering others' points of view or
of empowering others for dialogue, for which the company is often not
ready.
Several of the dilemmas presented may be exacerbated by the lack of
perspective of those involved. After all, the closer you are to something,
the more your perspective is jeopardized. Accordingly, stakeholder
engagement can be very useful, especially when it involves "friendly
critics”, who can see the facts with greater clarity and whose vision
might help those involved make a better decision.
We must " " and "
". Our understanding was that tools
which seek to set some parameters for sustainability practices help in
convincing and engaging more supporters in the organization: "
"
Apparently, sustainability themes still suggest practices that inhibit
operations, increase costs, reduce competitiveness, are excessively
idealistic, and, ultimately, jeopardize results. This idea is linked to the
obstacles already mentioned, such as excessive focus on short-term
results, fear of the unknown and the belief that practicing some values is
incompatible with business. Overcoming these aspects initially requires
using a language that speaks to this existing mental model, in order to
generate less resistance and enable a transformation. The various
forms of measurement fulfill to some degree this role, hence their
relevance. One of the interviewees highlights the "
make sustainability tangible there is a need formanagement mechanisms and tools
It wasnecessary to establish a discussion forum and to create a vision of thefuture which responded to the questions of why be sustainable and whatthe impacts on competitiveness and costs will be.
importance ofcommunication that is adequate for the company's most senior level,
Mapping and measuring3.4.
13 For comments on the diverse types of management tools related to sustainability for companies, see sections 5.3 (g)
and 6.4 in IBGC, 2007.
36 Experiences in Corporate Governance
But how is it possible to remain competitive with the restrictions that
good sustainability practices often impose? The answer, according to
our interviewees, is in the wide use of creativity and innovation: "
".
In general, the interviewees indicated that by considering sustainability
themes as a new set of maps or lenses, corporate governance agents
and other collaborators have the opportunity to see the company and its
business context in a different way, with new elements. The
combinations, alternatives and inspirations underlying this new
approach may lead to new insights and perceptions, feeding a creative
process of innovation. An example is stakeholder mapping, which can
lead to a new organized and strategic analysis of relationships and their
consequences in terms of risk management and identification of
opportunities.
Innovation for sustainability” implies considering limits such as the
ones imposed by the impossibility of the economy growing indefinitely,
which is virtually not dealt with in the business environment.
Wemust think about innovation to avoid a process that is just dreaming,since sustainability may require investments and increase costs
"
Creativity and innovation3.5.
INNOVATION FOR SUSTAINABILITY” IMPLIES CONSIDERING LIMITS SUCH AS THE ONES IMPOSED BY
THE IMPOSSIBILITY OF THE ECONOMY GROWING INDEFINITELY, WHICH IS VIRTUALLY NOT DEALT WITH
IN THE BUSINESS ENVIRONMENT
with the appropriate use of indicators that better communicate with theirdaily activities
demand and stimulateWe must include sustainability performance targets in remuneration
schemes.prove it's real and analyze what
kind of value it may add
".
Standards and monitoring tools also help to " ".
“
" The use of indicators, metrics and diagnostics make the path
to sustainability more tangible and help "
".
However, it is worth highlighting that not everything is "tangible" or
"measurable" and obstinately trying to measure everything can lead to
mistakes.
13
37Stepping stones
WE MUST
"SEARCH FOR
COLLECTIVE AND NOT
INDIVIDUAL RESULTS"
AND "RESIST THE
TEMPTATION FOR FAST
PROFITS" OR “FOR
PROFITS AT ANY COST
Finally, one other indispensable ingredient in this recipe: conviction. Our
interviewees agree among themselves when they say, "
". It became clear that the
search for elements, such as indicators, to sensitize the most skeptical is
crucial; that engaging in a process of dialogue, reflection and
communication in support of cultural shifts is essential; and that good
corporate governance is a powerful support along the way. However, a
great part of the process depends on belief. "
", they say.
An element that is complementary to conviction is commitment, which,
often, requires " ". We must
" " and "
" or “ ". We do not always
have a concrete or quantitative element to justify this sacrifice. As
already mentioned, the results of managing more in line with
sustainability may materialize in the long term or be very intangible. It is
necessary to search for the “ ”, “
". Although the "
"
Behind the scientific information, behind the belief, conviction and
commitment, is an inner perception that there would not be any another
way. It is not about " " ethics or alignment with sustainability, to
the detriment of other factors, but feeling that "
", for the sake of the individual, the company and society.
In practice, this may mean that " ”,"
" or "
". We know that, in
some instances, these choices are outside the reach of each person.
However, as one interviewee points out: "
". It is necessary
to have the will and to continue to practice what is understood as the
right thing and accept the consequences.
Individual involvement with voluntary initiatives, through industry
associations, educational institutes, philanthropy or other initiatives,
helps temper the most exacerbated individualism with the quest for
collective results. This kind of experience may be useful in developing a
sense of empathy and responsibility for others, in line with various
aspects of sustainability.
If there is nobelief, it becomes a bureaucratic process
We must believe, we musthave conviction
giving up individualism and your comfort zonesearch for collective and not individual results resist the
temptation for fast profits for profits at any cost
middle road" and "do what is right evengoing beyond legal requirements change begins forconvenience, it ends up happening out of conviction.
choosingthere is no other
possible choice
sometimes, we must change jobs sellthe company work in organizations in which you identify with thevalues and have the possibility of being a whole person
Sometimes it is impossible todo it 100% right, but we must have the intention to do so
Commitment and conviction3.6.
Call for reflection
Our interviewees have provided us with a series of observations and
questions that create an opportunity for reflection. As a conclusion
we invite you to consider the following questions, without trying to
offer ready-made solutions.
4
40 Experiences in Corporate Governance
Making sustainability tangible, using indicators, management tools and
targets – all of this helps to embed sustainability into company strategy,
but there is a caveat. Indicators and tools do not, by themselves, move us
along the path: "
". It is crucial to realize the
moment a tool becomes a goal in itself, limiting the process to publishing
a report or to designing indicators and metrics, without necessarily
generating a transformation in the way the company acts in the world.
There is no doubt that tools help and may be the beginning of a process
or even the result of steps already taken, however they are the means,
not the end.
It may turn into bureaucracy at the mercy of a leadershipwhich has not understood the final objective
"Everything that can be measured is manageable”, goes the
old business adage, but in the search for sustainability, would
it not be as relevant to also manage that which might not
always be measurable?
How should we understand the purpose of each tool and the
relationship between them?
Superficial initiatives and exaggerated marketing actions are evidence
of the disconnect between what is being talked about and what it being
done. "
”, such as advances in eco-efficiency initiatives and stakeholder
communication without properly focusing on core business. Our
interviewees reinforce the need for coherence, within the limitations
they have mentioned. Still, they draw attention to the issue of intention
and limits of practical reality: " ",
"
". The need for coherence in intentions transforms the search
for sustainability into a process of qualitative and evolutionary change.
In other words, it indicates a movement in which governance agents do
not stand still in the face of actions that go against their values, nor
evade the responsibility of trying to change them. They manage a
sensitive balance between the end they seek to achieve and the means
at their disposal: " ".
Many companies consciously embrace actions to build asustainable image, but their practices end up a long way from that veryimage
Bend the rules, but don't break themWe need to know when we are being flexible and when we are selling
our soul
I may step off the path, but I do not lose my North
When the tool becomes the goal
Walking the talk
4.1.
4.2.
INDICATORS
AND TOOLS
DO NOT, BY THEMSELVES,
MOVE US ALONG THE PATH
?
41Call for reflection
The establishment of corporate foundations or institutes in order to
exercise corporate citizenship deserves more discussion. “
" says one
of the interviewees, emphasizing that function is more important than
structure. Once the management model incorporates sustainability
issues, little additional structure should be required. We heard various
ways in which alignment with sustainability happens through cultural
change, because it requires a mental model distinct from the norm. It is a
different way of acting and thinking, which should permeate the entire
enterprise. Thus, care is needed in establishing an institute or
foundation with the objective of strengthening the company's
sustainability structure, since depending on the level of maturity of
sustainability – or the leadership's level of awareness – it could end up
amounting to an outsourcing of sustainability, which is meaningless.
The ideal iswhen the existence of an institute or a dedicated department is no longerrequired, because sustainability has already been incorporated
A corporate institute or foundation can be a great tool for
social investment or for developing relationships with some
stakeholders, but is it the best vehicle to embed
sustainability in the company's strategy?
What makes social investments sponsored by company
resources a strategic action aligned with sustainability?
If a social investment does not meet a company's strategic
need, would some shareholders not have the right to choose
not to delegate the company this task?
Institutes and foundations4.3.
Given that embedding sustainability into company strategy
is a process, how will governance agents who are willing to
follow this path know if they are being consistent?
How will they know if they are breaking a rule or just being
flexible?
When will they perceive if they are moving away from their
values?
?
?
42 Experiences in Corporate Governance
THE NATURE OF THE
COMPANY
THE NATURE OF
BUSINESS
We must understand the
business deeply and ask
ourselves fundamental
questions leading to
reflections on "what" to do
and "how" to do it.
stressed the
need for "each company to
play the role expected of it,
to be structured to fulfill this
role and to ask whether the
business is being conducted
correctly".
JOSÉ LUIZ MAJOLA
Advancing this theme, Claude
Ouimet says that at some
point, you should "ask
whether the business itself
should be maintained, if it
cannot be operated in a
sustainable manner". This is a
profound question that is not
yet on the radar of most
investors and managers.
We encountered situations in which the search for coherence led
companies to broaden the definition of their sphere of interest and
participate in self-regulation initiatives, expanding the breadth of their
actions. Sectoral initiatives via industry associations, lobbies and
movements to improve legislation, and joint actions for fair trade are
some examples They all extend the reach of the company s actions and
may be a way of maintaining competitiveness when the search for
sustainability gives rise to internalization of costs that were previously
externalized.
. '
14
If the process of taking on new responsibilities can affect the
viability of companies, how do we pursue this path?
How do we know when the company is falling short of what it
could do or overstepping its limits and performing a role for
which it lacks legitimacy in the eyes of society?
In a society aligned with sustainability, what would be the role
of companies?
One last line of questioning was generated by the expression of the
interviewees' world visions, especially regarding the future of this
process. Many agree that we are in the initial stages and that there still is
a long way to go to reverse the unsustainable levels this planet has
reached. Companies will have to undergo many changes to really
incorporate the spirit of sustainability in their processes.
Limits of action and leadership
The future
4.4.
4.5.
?
14 See section 2.2.2 in IBGC (2007).
43Call for reflection
?Would an organic evolution of this process be enough for us to
move off the path of social and environmental degradation?
Would it not require a discontinuity, a rupture with the
current model, to achieve the necessary and desired
transformation?
What kind of legacy do we want to leave?
To conclude, we believe that transformation in the world of
organizations starts from individuals and we, individuals, change when
we question ourselves, give ourselves the benefit of the doubt and go for
action.
THAT
TRANSFORMATION
IN THE WORLD OF
ORGANIZATIONS
STARTS FROM
INDIVIDUALS AND
WE, INDIVIDUALS,
CHANGE WHEN WE
QUESTION OURSELVES,
GIVE OURSELVES THE
BENEFIT OF THE DOUBT
AND GO FOR ACTION
44 Experiences in Corporate Governance
During 10 years of working in corporate sustainability across many
countries, including Brazil, I have seen the field evolve enormously.
There is a growing recognition of the legitimate and crucial role that
business can play in sustainable development. That said, while the
potential contribution of business now seems clear, the path from
awareness to decision, and then to action, is much less certain. Whether
companies move towards sustainability is ultimately determined by the
collective impact of myriad individual decisions and actions – and this is
where '
' makes a timely contribution.
One challenge described in the document, which resonates with my
experience, is the risk that governance tools – stakeholder engagement
or risk management, for example – can become ends in themselves,
rather than means to an end. Tools then become tick box exercises,
divorced from the functions they are meant to fulfill. In their haste to
move quickly to end results, companies often miss processes and steps
that are critical to how the tools function, with potentially detrimental
consequences further down the road.
This tendency to race ahead is intimately linked with the question of
time horizons, which comes up again and again throughout the
document. While business executives are generally measured and
rewarded based on quarterly and annual achievements, sustainability is,
by definition, a long-term affair. One response to this tension is to phase
a company's sustainability strategy. By tackling easier aspects first,
'quick wins' are created, demonstrating what is possible and thus
building momentum for the steeper challenges which lie ahead.
The document also raises a sensitive dilemma. How does a business
leader know if they are really being true to their values – or whether
these are being crushed under the weight of competing priorities,
alternative cultural norms, or simply the pressure to get things done?
The challenge arises not only because the issues are rarely clear-cut,
but because it is difficult to view our own decisions with perspective.
Here is where third parties, especially 'friendly critics' can play an
invaluable role – reflecting back to companies a view of their decisions
and actions. Stakeholders can only play this role, however, when they
are enabled to engage with companies on equal terms. This underlines
once again the importance of the process that lies behind tools like
stakeholder engagement, if they are to function properly.
The practice of sustainability: Challenges experienced by
corporate governance agents
Afterword5.
45Call for reflection
While the press is peppered with interviews where individual business
leaders describe critical decision points and challenges they have faced
in steering their organizations to success (and sometimes failure),
there have been few attempts to systematically analyze the combined
experiences of corporate governance agents. This has been the
objective of '
', and the result is a rich document
and a unique analysis that makes an important contribution to our
understanding of leadership and sustainability, and merits a wide
dissemination.
The practice of sustainability: Challenges experienced
by corporate governance agents
Jodie Thorpe has worked in the field of corporate sustainability since the late
1990s, as an advisor to both the private and civil society sectors. She is a former
Director at SustainAbility, an international consultancy and think-tank
specializing in business strategies and sustainability. She led their Emerging
Economies program, advising leading companies such as Anglo-American,
Aracruz Celulose, Banco Real, Coca-Cola, Natura, Nestle and Unilever, as well as
authoring or co-authoring numerous articles and reports.
46 Experiences in Corporate Governance
The following is a brief biography of the interviewees.
Claude is an executive with InterfaceFLOR, a company well-recognized
for its commitment to integrate sustainability throughout the corporate
culture. With extensive experience in production, sales and marketing,
Claude is the senior vice president and general manager for Canada and
Latin America. He is a member of Banco Santander Real's Advisory
Council for Sustainability and of the National Business Advisory Council
of the David Suzuki Foundation.
Eduardo is CEO of LAZAM MDS Gestão de Seguros, the third largest
company in its sector in Brazil, and member of the board of directors of
MDS Holding, the world's 15th largest insurance and reinsurance
brokerage firm. Formerly he was president of Brasilprev and CIGNA
Previdência. Eduardo holds a degree in economics from FEA-USP and a
post-graduate degree in finance and marketing at FGV-SP. He's the
author of the book "Empreendedor Corporativo”, published in 2003. He
is also an advisor to private companies, to the Akatu Institute for
Conscious Consumption and to EDH - Entrepreneurs for Human
Development, and a member of the Advisory Council of CONARH and
the Corporate Governance Committee of AMCHAM/SP.
José Luiz is an advisor with Condere Consulting, and was a senior
executive in large banks in Brazil and abroad, including Barclays, ING,
Santander and ABN AMRO. With ABN Amro he was executive vice
president of Banco Real, CRO (chief risk officer) and COO (chief
operating officer) of ABN AMRO in Latin America, including Argentina,
Chile, Colombia, Venezuela and Mexico. He is the founder and president
of Terpenoil Tecnologia Orgânica.
Luiz Ernesto graduated in engineering from the Polytechnical School of
the University of Sao Paulo, and completed specialized courses in
administration, finance and planning at FGV, USP-FEA, Wharton and
Harvard. He joined Promon in 1978 and, since 1986, has been part of the
Executive Committee. In 2001 he was elected CEO of Promon S.A. and
president of the Deliberative Council of the Promon Social Welfare
Foundation. He is a member of the Board of Natura and of the Advisory
Council of the Akatu Institute.
Claude Ouimet
Eduardo Bom Ângelo
José Luiz Majolo
Luiz Ernesto Gemignani
Biographical references6.
47Biographical references
Marcos B. Egydio Martins
Marcos is an agricultural engineer, with specialization in organic
agriculture, and is an associate consultant with Apel Research and
Project Development. He was manager of agriculture and livestock
(1985-95), executive director of the Forestry Foundation / Secretary of
the Environment-SP (1995-99), ombudsman for SABESP (1999-2001),
director-superintendent of Ecofuturo Institute (Group Suzano: 2001-05)
and director of sustainability of Natura Cosmetics (2005-07). He
participated in the Environmental Forum Leaders at Columbia
University, and served as a member of the Strategic Advisory Group of
ISO26000/CSR. He did an executive MBA at BSP-SP, the global MBA by
the Rotman School, Canada and the green entrepreneurship course at
Schumacher College, England. Currently Marcos is a consultant
specializing in planning, management and sustainability strategy
implementation, and organizational culture. He is a member of the
Advisory Council of IBD Certificações, and is a partner of Origami
Consulting in Sustainable Business Management.
Ralph is representative and investor of AxialPar in the Advisory Councils
of invested companies, including acting as president for one of the
councils. He has management and administrative experience in
agribusiness and transnational companies. He was a member of the
Global Executive Committee of Novartis Animal Health AG in
Switzerland, and CEO of Novartis Animal Health SA de CV, in Mexico. He
graduated in veterinary medicine at USP in 1972, received a doctorate in
animal breeding from the Hannover Superior School of Veterinary
Medicine in 1974, and CEAG from FGV in 1984.
Renata is one of the shareholders and directors of Participações Morro
Vermelho S.A. (PMV), holding company of the Camargo Corrêa Group,
one of the largest private business conglomerates in Brazil. Since 1975,
she has been active in the area of social development, through the
creation of and/or support for organizations active in the areas of
education, community development and corporate social responsibility.
Renata is a member of the council of several organizations, including the
Camargo Corrêa Institute, Loma Negra Foundation, Alpargatas
Institute, Institute for Corporate Citizenship-Maranhão, Cradle Work
Association, Inter-American Foundation and Alcoa Foundation. She is
executive-president and founder of the Institute of Corporate
Citizenship SP, president of the Alcoa Institute and of Comunitas –
Parcerias para o Desenvolvimento Solidário.
Ralph Dieter Wehrle
Renata de Camargo Nascimento
49Bibliographical references
BADARACCO JR., J. (1998) "The discipline of building character", in:
HARVARD BUSINESS REVIEW (2003)
, The Harvard Business Review paperback series.
Boston: Harvard Business School Press.
IBGC - Brazilian Institute of Corporate Governance (2009)
, 4th edition, São Paulo: IBGC.
IBGC - Brazilian Institute of Corporate Governance (2007)
Corporate Governance Handbooks, 4, São Paulo:
IBGC.
LOBOS J. (2003) , São Paulo: Instituto da Qualidade.
MACHADO FILHO, C. A. P. (2006):
, São Paulo: Thomson.
Harvard Business Review oncorporate ethics
Code of BestPractice of Corporate Governance
SustainabilityGuide for Companies,
Ética & Negócios
Responsabilidade social e governança:o debate e as implicações
Bibliographical references7.
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