Brazil should be the first carbon neutral nation, says president of Roland Berger

The pandemic and the climate crisis are causing major changes in the economic development model, and Brazil has the potential to be one of the winning countries. This statement is made by António Bernardo, president of the Roland Berger international consultancy in Brazil.

In an interview with leaf, he says the country should strive to be the first to achieve carbon neutrality. “That would be a fantastic goal. Almost all countries, mainly in Europe, are setting 2050 as the deadline for neutrality”, he says.

For Bernardo, Brazil can be a leader in everything related to sustainable industries, but the private sector needs to have a different role.

According to him, companies are still only in the discourse of the ESG (English acronym for good environmental, social and governance practices), despite some good exceptions.

“There is still a lack of depth, that is, to clearly analyze the entire value chain”, he says. “We have to go to the next level, which is really changing the business model. Companies with a true orientation towards sustainability will have better returns in the medium term.”

How do you see the current global economic scenario and what is Brazil’s potential?

What we have seen is that the pandemic and climate change are causing major changes in economic and social models. There is a new vacancy emerging and Brazil could be the winner.

Brazil should be one of the first to achieve carbon neutrality. That would be a fantastic goal. Almost all countries, especially in Europe, are setting 2050 as the deadline for neutrality. Brazil should be the first, or one of the first countries, to achieve this goal.

Brazil has been internationally criticized for the government’s role in the environmental issue. Is there still investor skepticism?

Exists. Investors are still skeptical about Brazil’s position on these issues of climate change and energy transition. Of course they see the difference between a group of companies that already have a strategic vision and that may have competitive advantages. But they also see a political system not proactive about these aspects.

There is skepticism about the Amazon issue and the news that comes out about deforestation. Unlike other countries, this is Brazil’s main challenge for decarbonization.

There is a need to build a national consensus on three or four big issues, and that would certainly be one of them. Investors are looking forward to having this confirmation. On the one hand, they consider that the country has the potential to be a leader in this development model, but they still do not see a national consensus on this.

What are these big questions you refer to?

A very important issue is economic growth. Brazil has to grow above 5% a year over the next 20 years. This growth entails a drastic increase in GDP per capita, which has been almost frozen for years. The third goal is to reduce inequality. If Brazil does not have a strong middle class, it will be difficult to have sustainable economic growth.

Another issue is increasing productivity with investment in innovation, and a fifth aspect is the carbon neutrality goal. Brazil should strive to be the first, or one of the first, to achieve neutrality. There is a lot of potential for this to happen.

How do you get there? With a different role from the State, being more strategic. A smaller and better state. But, above all, a different role for companies.

You mention growth above 5% per year. In Brazil, is it possible to reconcile this advance with respect to climate issues?

Climate change and the opportunities that will exist in the energy transition will create new businesses, where Brazil can be a very important global player. I believe that the country can be one of the most competitive in green hydrogen, as it is in renewables. In everything related to sustainable industries, Brazil can be a leader.

​What would be the role of companies in this new model?

Their role is fundamental, not only in economic aspects, but also in social aspects and in influencing the political system to understand which are the medium and long-term programs that create wealth in the country.

Companies can make a very big contribution to this influence, as well as to the opening of the economy and privatizations. For this, federations and confederations must transform. They need to be true think tanks, independent of governments and with a role to reinforce competitiveness and innovation.

Businesses are so powerful in the economy that, if they are together, they can positively influence and condition the political system.

Do you believe that companies would give up part of their profits in favor of a fairer development?

I was very impressed with a relevant group of entrepreneurs that I spoke with. They think this model [de acumulação] it’s exhausted, it’s over. If it doesn’t reduce inequality, if it doesn’t create a stronger middle class and redistribute wealth, the market will not develop with the potential that exists. I felt a great openness, not only from the companies, but even from the entrepreneurs on a personal level.

But we are still in a pandemic where the billionaires became more billionaires and part of the population went hungry again. When businesspeople say that, doesn’t it generate a certain amount of skepticism?

I think it can generate, but that has been well understood. I was talking to these entrepreneurs and I noticed that they had this strategic vision and willingness to change. They think that the country’s development, right now, is not so much [pelo caminho de] accumulate more wealth, but redistribute better.

I see a modern strategic vision, with entrepreneurs who have the objective not only of enriching themselves, but also of contributing to the improvement of society. It would be a shame if Brazil were not able to unite these wills to have an even greater impact on the economic and social system.

Is this movement of companies happening in the proper proportion and at the right speed?

It is not. There are small pioneer groups that are talking, but there needs to be a bigger dimension. Federations and confederations can play an important role, but they need to change the way they act and be independent from the government.

These entities should create a movement with these main businessmen, which is not a political movement. I think the embryo is released, now it is necessary to gain a body. Brazil, in 2030, could be a winning country.

You mentioned the issue of carbon neutrality, but recently we’ve seen a significant increase in deforestation rates. This trend would need to be circumvented. Is there a perspective for this?

It is indispensable. The positive pressure of this movement [empresarial] will play a very important role. Even in agribusiness, companies are already beginning to demonstrate that they want sustainability, because if not, the products [que elas vendem] will no longer be accepted.

How do you see this ESG wave? Is it just the speech or is the commitment real?

Generally speaking, it’s still in terms of communication, of public relations. There are a number of companies that have already made progress, but they are the minority. There is still a lack of depth, that is, clearly analyzing the entire value chain and understanding what needs to be done to improve in environmental, social and diversity terms, among others.

We have to go to the next level, which is really changing the business model. Companies with a true orientation towards sustainability will have better returns in the medium term, employees will prefer to work with them and the capital market itself will provide more support.

That’s another important thing, the role of banks in ESG. They will have to analyze their portfolios and dare not give credit or raise rates to companies that don’t implement this agenda. Banks are great inductors of business transformation.

Wouldn’t the State also have a role in inducing these issues?

I think so, but it doesn’t have to be a heavy state. This strategic State, as I call it, has this role of regulator, incentive and inspection.

How do you evaluate the Brazilian private sector in comparison with Europe, considering this new economic model?

Europe has defined sustainability and energy transition as the theme to lead in the next 20 years. From an innovation standpoint, the European Union has lagged slightly behind the United States and China, but now it’s decided it’s time to lead in something.

Over the next three years, Portugal, Spain and Italy alone will invest something like 400 billion euros [R$ 2,5 trilhões] these programs of economic and social transformation. Just these three countries.

Brazil is at an early stage. We see some companies that are more advanced and aware of these aspects, but there is a big gap [lacuna] in relation to the rest of the companies.

X-RAY

António Bernardo, 62

President of the Roland Berger international consultancy in Brazil and responsible for the offices in Portugal, Mexico and Angola. Born in Portugal, he worked for the European Commission and was director of corporate finance at Deutsche Bank – Investment Bank. He is also a member of the board of directors of the Brazil-Germany Chamber of Commerce and Industry.