Brazilian standards advance adoption of ESG business practices

New rules bring standards in line with ESG cornerstones, a topic that has been gaining prominence in the country

By Luciana Uchôa

Environmental, Social and Governance (ESG) has been taking on a vital role for businesses worldwide and is becoming increasingly relevant on a global scale.

This set of aspects refer to environmental, social and corporate governance issues that companies and organizations should take into account in their operations, as today’s society places growing demands on sustainability, social accountability and transparency in business policies.

A survey carried out in Brazil by the National Industry Confederation (CNI) titled "Portraits of Society: sustainable habits and conscious consumption" has shown that 59% of Brazilians have rejected brands or companies due to one of these reasons, which include workers’ rights violations, testing or mistreatment of animals, environmental crimes and so forth.

It is crucial for companies to adopt such principles, as failure to comply with those standards can result in reputational damage, loss in competitiveness and even exposure to legal sanctions.

Along these lines, Brazil has been putting standards and policies in place and passing regulations to foster the implementation of ESG practices by businesses in the country.

Latest Brazilian standards x ESG

Brazil still lacks a clear definition of what practices can be understood as in line with ESG principles, but in recent years significant progress has been made for defining rules that relate to the issue, whether directly or not.

Decree No. 11,075/2022 created a regulated carbon market and defined the concept of carbon credits for legislative purposes, showing the country's interest in boosting emission trading. Also of note is BCB Normative Ruling No. 325/2022, which determines how eco-friendly assets should be recorded by financial institutions.

Further reading: Brazil pushes forward on efforts related to the carbon market

Also in 2022, the Federal Accounting Council created the Brazilian Committee for Sustainability Pronouncements (CBPS), whose purposes include setting disclosure standards in this regard so that regulatory agencies can issue new regulations that take international standards into account.

In addition, CVM Resolution No. 59/2021 came into force in January 2023, setting standards for compliance with ESG principles. Since then, publicly traded companies have been required to report and justify certain indicators in the event of non-compliance.

On the labor front, the recently published Equal Pay Act prohibits employers from paying different wages for work performed under the same conditions, increases anti-discrimination enforcement and sets rules for salary and pay transparency.

Since March 2023, companies with an Internal Accident and Harassment Prevention Commission (CIPAA) must adopt measures to prevent and combat sexual harassment and workplace violence, such as implementing an internal reporting channel. Read more here .

There are also tax breaks at the local, state and federal levels for companies that sponsor sports and cultural projects and create opportunities for children and the elderly, as a way of contributing to social development and strengthening business practices in this regard.

Bill No. 4,363/2021, which is currently in Congress, provides for the creation of an ESG certification to award companies that invest in environmental, social and governance-oriented efforts and projects. These businesses are expected to be granted better financing conditions from public and private banks, tie-breakers in government tenders, priority in procedures required for their operations as a going concern, and other benefits.

Support to overcome challenges

Relying on partners who are aware of the current scenario and requirements is essential. Our team at Domingues e Pinho Contadores assists clients in applying tax, labor and social security laws and regulations by offering a full range of solutions. Talk to our experts at: dpc@dpc.com.br.