ESG Newsletter | ABNT national consultation on ESG concepts, guidelines and evaluation model open until November 09

[vc_row css=”.vc_custom_1655220644729{margin-top: 0px !important;margin-right: 0px !important;margin-bottom: 0px !important;margin-left: 0px !important;}”][vc_column][vc_column_text]In an effort to develop a national standard focused on the ESG agenda, the Brazilian Association for Technical Standards (“ABNT”) published the ABNT PR 2030 Project, which remains open for national consultation until November 09, 2022.

ESG methodologies and principles worldwide are provided for through numerous different standards, by different national and international entities.

The ABNT Project aims to establish a unified methodology for the application of ESG criteria by any type of organization, whether public or private companies, government entities or non-profit organizations, regardless of their size or the sector in which they operate.

ABNT is especially concerned with enabling access and application of the methodology by micro, small, and medium-sized companies, endowed with fewer funds to allocate to their operations. In this regard, the ABNT aims to extend their reach beyond large companies and the main scope itself, in order to assist companies of all sizes interconnect their value chain.

ABNT employs a combination of already existing metrics that are widely accepted within the market, compiling into a single document the most recurring and relevant topics gathered from the best international practices and standards (such as ISO, GRI, SASB, IIRC, CDP, and TCFD), and local ones (such as B3’s Sustainability Index).

Seven steps are defined for the effective use of ESG criteria:

1. Assessment
2. Having strategic intent
3. Diagnosing
4. Planning
5. Implementing
6. Measuring and monitoring
7. Reporting and Communicating

This first document addresses the first three steps, while the others are scheduled for a new consultation in early 2023.

In regard to the diagnosing phase, the document establishes an evaluation and guidance system, composed of a scale of five progression levels. Such system enables the organization to determine its maturity level in relation to a certain criterion within the environmental, social, or governance scopes. Subsequently, the company can establish its progression targets by knowing its materiality.

According to ABNT, the 42 criteria listed in the draft of the proposed technical standard would need to be standardized, introducing maturity levels, explanations, related Sustainable Development Goals and good implementation practices. Once the company has grasped the main elements of the standard and assessed its degree of materiality within each criterion, it will be able to outline a progression plan and prepare itself to carry out better management, understanding its strengths and potential weaknesses.

As such, the ABNT’s draft technical standard aims to prepare the Brazilian economy for any future requirements that may be instituted, internally or externally, and to generate competitive advantage in the national and international markets, as well as more wealth, and more job opportunities for institutions that choose to adopt it.

The draft technical standard also provides definitions of important concepts that arise in the market due to the misappropriation of the ESG nomenclature. The text states that

The practice of misleading consumers on issues related to an organization’s social and environmental practices, or the environmental benefits of a product or service – such as ‘greenwashing’, ‘rainbow-washing’, ‘purpose washing’, or ‘SDG-washing’ – constitutes the dissemination of a false or exaggerated public image, without the support of real and effective actions and results, which must not occur”.

If approved, the ABNT technical standard will be a non-binding guide aimed at companies that intend to meet the demands of the ESG agenda. The document will be updated and revised as new national and international trends, methodologies and concepts progress.

Additionally, the guide will be sent to the International Organization for Standardization (“ISO”), the entity responsible for bringing together international standards for 162 countries. The purpose is to assist the ISO in drafting its own document, using the Brazilian text as a basis, in a procedure similar to that of the Social Responsibility rule.

Demarest’s ESG team is available to provide further information and clarify any doubts that may be necessary.[/vc_column_text][/vc_column][/vc_row]