How important is governance to ESG?

Learn more about one of the pillars of corporate sustainability

Both in Brazil and abroad, the ESG It has gained more and more importance and prominence, which is why it is now considered a necessity for any company or organization. 

In this acronym, the letter “G” stands for governance, that is, the way a company is managed, monitored and what power structure it adopts. 

Find out more below about what governance is and how important it is for ESG — and check out some examples and the role it plays in the iFood business ecosystem.  

What is governance in ESG?

Governance in ESG refers to how a company or organization is managed and whether management complies with the interests of its shareholders

The acronym ESG (Environmental, Social and Governance, which in Portuguese means Environmental, Social and Governance) defines sustainability practices defended by the financial market.  

According to the Brazilian Institute of Corporate Governance (IBGC), governance is the system by which companies are directed, monitored and encouraged. 

Governance concerns the remuneration policy of senior management, structure of fiscal and audit committees, diversity on the administrative board, ethics and transparency. 

How important is governance for ESG?

Governance is of great importance for the ESG: it is your support base in the face of environmental risks, social implications and opportunities in the socio-environmental area.  

When making decisions, risks and opportunities in the area of governance must be considered, as inadequate practices can lead to corporate crises. 

Avoiding reputational risks is what motivates the incorporation of ESG in the majority of the 167 companies interviewed in the survey “ESG and Publicly Traded Companies”, performed by Grant Thornton. 

How does governance impact ESG?

Governance impacts ESG positively or negatively according to the practices adopted by a company or organization regarding transparency, ethics and conduct. 

Within the concept of financial materiality, the governance structure is one of the most relevant ESG factors, according to the index EDS (Economic Dimension Score).

Known as the economic dimension score, the EDS is used to evaluate the corporate governance performance of companies. 

The EDS also includes measurements relating to the quality of a company's management, its ability to manage risks and opportunities in the long term. 

In this sense, governance management will define the direction, viability and success of all other sustainability projects, whether social or environmental. 

Solutions for ESG projects

There are several solutions within ESG projects to attract investors and improve the company's image in the face of stakeholders, whose interests must be considered. 

These solutions relate to eight criteria established by the EDS, which define good governance, differentiating it from poor governance management. 

They are: corporate governance, codes of conduct, risk and crisis management, supply chain management, tax strategy, materiality, political influence and impact measurement and evaluation. 

Among the solutions, the following stand out: 

  • practices compliance
  • Reporting Code of Conduct Violations
  • Sensitivity analysis and stress testing 
  • ESG integration in the supply chain
  • Supplier code of conduct
  • Tax strategy 
  • Fiscal management reports 
  • Impact assessment 
  • Identification of long-term risks
  • Metrics on advances and benefits for dissemination to stakeholders 
  • Allocation of resources to support actions and/or organizations that positively influence public policies, laws and regulations 
  • Metrics to track social and environmental impacts 

Governance: see your role within iFood

ESG governance plays a fundamental role within iFood, whether in transparency in the disclosure of data and results or in the preparation of codes of ethics and conduct. 

The Food Lovers Code of Ethics and Conduct and the Third Party Code of Ethics and Conduct are part of the good ESG governance practices within iFood. 

Data protection is another example: the Privacy Portal aims to provide more transparency to the company's commitment to privacy. 

A data security is a priority at iFood, which protects data based on the law and best market practices, with monitoring, security tests and cryptography.

Another role that ESG governance has at iFood is transparency. The Integrity channel is an example of how transparency works. It is a safe space where anyone can anonymously report (if desired) conduct that is not ethical, transparent, fair or in disagreement with current internal regulations and legislation.

ESG governance: examples

Examples of ESG Governance factors that can be observed in a company include tax strategy, corporate risk management and executive remuneration.

There are other examples such as donations and political lobbying, if there are cases of corruption and bribery and the administrative council structure, if there is diversity of gender and race. 

The way in which the interests of shareholders are protected and disclosed on all the topics mentioned above are also part of ESG governance. 

With regard to Brazilian legislation, examples of ESG governance include the Corporation Law, Anti-Corruption Law, General Data Protection Law, and the Bidding and Administrative Contracts Law. 

Was this content useful to you?

Related posts