Opinion: Sustainability Now Raises Profits and Market Value for Companies

Climate change and global warming, with potentially destructive effects on humanity, have required governments and companies to adopt robust measures to mitigate environmental impacts on economic production. In this scenario, initiatives around the so-called circular economy develop technological solutions and educational campaigns that help “clean” the production chain and improve waste management in various sectors.

In Brazil, adherence to the circular economy has also been driven by industry. A survey by the CNI (National Confederation of Industry), from 2019, shows that 76.4% of the country’s industries adopt some type of process linked to the circular economy to increase the useful life of products and materials. Water reuse, material recycling and reverse logistics are the main situations found in the range of actions of the Brazilian industry. Among the reasons that lead companies to adopt good practices, according to the CNI survey, first comes cost reduction; followed by operational efficiency and then new business opportunity.

A survey on the profile of Brazilian consumers, also from CNI, shows that 38% of respondents always check or sometimes check whether the products were produced in an environmentally correct way. The survey also reveals that Brazilians are also more aware of the destination of waste. The number of people separating garbage for recycling grew from 47% in 2013 to 55% last year.

Changing business models takes time and sometimes some additional cost for those who produce and those who buy. But, what if, in a scenario of financial difficulties brought by 2020 and with an echo in 2021, it was possible to embrace a more sustainable and profitable alternative?

This is one of the possible gains with the adoption of a circular economy model, combining improvements to the ecosystem of extraction and use of raw materials to the reuse of waste as a profitable product. And Brazil already has initiatives that can help the country to be part of a market that, in Europe alone, can generate more than US$ 1.8 trillion in value gains by the year 2030.

The basic principles of this model are: eliminate waste and pollution from the beginning; keep products and materials in use and regenerate natural systems. Furthermore, it is necessary to think in a systemic way about the different relationships between the production and consumption system. The bases for the expansion of the concept in Brazil demand an efficient reverse logistics system, which allows for recycling and remanufacturing, but which is complex to implement in countries like Brazil, with great extension and different levels of development and income between regions.

To overcome this obstacle, the creation of small circular production and consumption cells in some regions is a good way to go. With a smaller scale, it becomes more viable to see possibilities and modify production processes, including waste as a production resource that returns to the production chain, generates jobs and allows for less harmful exploitation to the environment.

For example, a shoe industry that reduces leather waste is not only reducing its environmental impact, but also its raw material costs. For this, changes can be made to the production processes with improvements in cutting patterns or design, with the creation of shoes that use less leather or use it more efficiently.

It is true to say that Brazilian and foreign investors are concerned with injecting capital, not only in profitable companies, but that have an environmental, social and governance practice focused on minimizing environmental impacts. This movement is known as Agenda ESG, the acronym in English for Environmental, Social and Governance, which means “Environmental, Social and Governance”, in free translation.

It is on the rise and recent studies have shown that companies that adopt the best social and environmental practices present greater profitability and a significant increase in their market value over time.

Companies committed to this agenda benefit not only from improving their image, but also from reducing the perception of risk in their activities. Over time, these companies reposition themselves in the market, investors, customers and authorities, incorporating the culture of sustainability into their brand.

It is worth remembering that earlier this year, the IDB (Inter-American Development Bank) signed a cooperation agreement with the BNDES (National Bank for Economic and Social Development) with the objective of creating a system for validating and increasing the issuance of green bonds in the Parents.

The idea is to establish a normative framework for validating projects capable of raising funds and stimulating the growth of this type of financing in Brazil, as well as encouraging the supply of the international carbon credit market to meet the demand in the national market.

The phrase “Sustainability is not fashion, it’s a necessity” that inspired enthusiasts of the theme in the 2000s takes on a new contour: it’s a necessity and it’s also profitable!