Chile | Recommendations of good practices in the field of human rights for companies

by Juan Manuel González | Apr 3, 2023 | Noticias-en

The  promotion, protection and respect of human rights  have traditionally been associated and attributed almost exclusively to a responsibility of the State. This paradigm today is in a clear process of transition towards a scenario in which the  company  appears as an agent that is responsible for assuming a leading role in the respect of these rights.

In a modern and globalized world, companies generate a great impact on people’s lives and also on local communities. Although the effects of this situation can be beneficial, thanks to the creation of jobs or the incentive they can generate for local investment, they can also bring harmful consequences in cases where violations of human rights are found, such as  : forced  labor , child labor, breaches of labor regulations, unequal treatment and discrimination, non-payment of an adequate salary, lack of freedom of association , among others.

In this context, and given that it is increasingly necessary to incorporate human rights policies in companies, we recommend carrying out the following practices, depending on the scenario in which they are located:

The company has not implemented human rights policies or due diligence

In this case, the company should begin by evaluating its potential and actual impacts on human rights, its existing activities and processes, supply chains, and relationships with third parties, in order to provide itself with adequate and effective controls, in conjunction with an action plan in this area. .

The company has adopted human rights due diligence policies and processes

In this case, the company must:

• Constantly monitor and review its risks in this area.
• Continuously verify the suitability of the channels or mechanisms that allow the relationship, communication and participation of stakeholders.
• Make the pertinent adjustments to achieve evolution in the prevention and repair mechanisms that the organization has.

Thus, our suggestion for all companies, however small, medium or large they may be, is to  proactively manage adverse effects  -potential or real- in terms of human rights, since if they do not incorporate policies, procedures today and strategies both in respect and in response to the impact on these rights, obviously will not be sustainable over time.

For more information on these topics you can contact:

Francesca Franzani  | Compliance Group Director | ffranzani@az.cl

Florence Fuentealba  | Associate | ffuentealba@az.cl

Cesar Robledo  | Associate | crobledo@az.cl

Compliance Latam | ESG to generate shared value and new business

by Juan Manuel González | Apr 3, 2023 | Noticias-en

Having an ESG strategy is a way for companies to assess how their business decisions affect the environment and society. Why is it important to generate sustainable businesses? Experts from prestigious firms in the region provide their opinion.

Social need and business opportunity come together to transform the way companies mitigate their impacts, drive performance, and report their results.

The ESG  criteria  -environmental, social and corporate governance, for its acronym in English- are a non-financial reporting mechanism whose objective is the implementation by companies and institutions of concrete actions that contribute to generating positive social impact in the community. , the environment and its internal government.

An ESG strategy that allows global challenges such as climate change, diversity and inclusion of different groups, sustainable financial management, among others, to be incorporated into the business and, by including them, enables companies to respond to current demands and future of society generating shared value and increasing its competitiveness.

Specialists from prestigious legal firms in the region provide their point of view on the importance of incorporating ESG strategies into business.

According to Florencia Fuentealba, Associate of the Compliance Group at az in Chile , “a company that has adopted ESG measures may have a better reputation than a company that has not done so, as it denotes that there is a concern to mitigate its negative impacts and even more , generate positive impact. Companies with ESG can be more competitive than one that does not, as ESG can increase business sustainability in a period of climate crisis, crisis of confidence, etc, allowing companies to obtain their social license to operate”.

However, the incorporation of ESG strategies has evolved and been refined over time. “Until a few years ago, having an ESG strategy was something voluntary for companies,” says Dorothea Garff, Senior Associate at the firm Beccar Varela of Argentina . “We understand that ESG strategies will become mandatory, because in many countries laws with extra-jurisdictional effects are beginning to be implemented that require compliance with certain standards.”

For Gerson Vaca Abendaño, Partner of Basham, Ringe y Correa de México “if we talk about value, we consider that there are different factors on which it is important to work, prepare and have ESG criteria in a company, which undoubtedly increases the value of this one compared to other companies in similar conditions”. And he describes as values: Understanding and mitigation of ESG and Competitiveness risks.

Impact on stakeholders: relationship with consumers

In recent years we have been able to observe a change in consumer behavior from a more passive role to a more empowered one, whereby they more frequently demand information regarding the products they consume, opting for those that, for example, respect fair trade, responsible value chains, care for the environment and not testing on animals.

“ESG strategies are fundamental in today’s society, without a doubt, they bring strategic and economic value to companies in all industries. A global awareness of the importance of this issue has been created, which arose as a need for a common problem and the issue gained strength with the United Nations resolution regarding the goals set by the countries in the 2030 Agenda,” he explains. Vivian Liberman, partner of the BLP firm in Central America .

Graff thinks along the same lines with his vision of Argentina. “Today consumers of any type of company ask for more explanations about the origin of the product and how it is made. We are increasingly aware of the environmental and social impact that an article can have. The brands that are positioned from the start with this strategy have a great future. But there are also sectors with more risks in environmental and human rights issues that should be dealt with more urgently”.

Investments and capital raising

In the case of investors, their priorities have changed in recent years. The best example of this is the investment fund Blackrock, which has already adopted a sustainability criterion for its investments. Thus, investors currently seek to finance companies that consider social, environmental and governance initiatives in their purpose and objectives, since these appear to be less risky than those in which there is no perspective in this regard.

Investment portfolios based on  ESG criteria  have proven to have less volatility, generate higher returns and guarantee long-term investment returns, generating sustained and lasting growth. On the other hand, companies that ignore these criteria could present conflicts with the communities, fraud, acts of corruption, financial irregularities and labor conflicts that seriously damage the corporate image and the operation of the business.

For Fuentealba, “when adopting an ESG strategy, it is not enough to make statements only, but as is done with financial factors, companies must incorporate objectives, goals and metrics to evaluate their progress. In my opinion, a good ESG strategy is one that can be measured and audited, as only then can we know if the desired impact is being generated or if the strategy and the chosen path should be reconsidered”.

“Investors consider this issue as a fundamental factor and apply it as part of their strategic analysis in non-financial factors when identifying risk areas and opportunities for economic growth,” agrees the BLP expert. “With this, ESG analysis becomes an important part of the investment process. In addition to contributing as a motivational key in environmental, social development and governance practices that allows a complete analysis to understand the company in which you want to invest or that you intend to hire”.

What an ESG strategy also brings to companies, especially in emerging markets such as Latin America, is a letter of introduction when it comes to generating new business opportunities. “There are companies that require their suppliers from other countries, especially European companies, to comply with certain standards. So for Latin America or particularly Argentina, if a company intends to be a supplier to a European company, it has to seriously consider the implementation of ESG criteria. For example, Germany already has a law in force that makes it mandatory to work on ESG axes”, says Garff.

“Having a good ESG strategy favors the proper functioning of companies, and it is becoming an essential requirement for certain clients or a valuable differentiator from their competition,” says Vaca. And he adds “On the other hand, a correct creation and implementation of an ESG strategy allows the company to better understand its market, its clients and its stakeholders, which gives an opportunity to create new lines of business or adapt existing ones to meet the demand or create new services or products thus generating new business”.

ESG investing is the future of investment strategies, because it helps mitigate risk, generate long-term value, and improve the performance of companies and organizations from different verticals. The most important thing that will continue to happen in 2023 and the years to come is the idea of ​​generating business within a framework of responsibility.

Peru | Code of Good Corporate Governance will be modified

by Juan Manuel González | Apr 3, 2023 | Noticias-en

Efforts continue for Peru to become a member of the Organization for Economic Cooperation and Development ( OECD ). Carmine Di Noia (CDN), director for Financial and Enterprise Affairs of the OECD and José Manuel Peschiera (JP), head of the Superintendence of the Stock Market (SMV), mention, in this interview, that the country will adopt the principles of the OECD and the G-20 for the modification of the Code of Good Corporate Governance.

The accession process to have the best OECD standards and practices is long and important. We will have missions to see where Peru is, but we hope that with this it can adopt better policies. We want to walk together with Peru to reach that result.

Since Peru was invited and sent the acceptance letter to start the process of accession to the OECD, we not only have the quality of participant but we are also invited to be part of the organization.

Peru must share the values, vision and priorities of the OECD to carry out this process. The preservation of individual freedom, the values ​​of democracy, the rule of law and the defense of human rights. With this framework we want a transparent and open economy.

In accordance with their powers, all components of the State have to complete the information in the initial memorandum to be sent to the OECD. The SMV has already sent the Ministry of Economy and Finance what corresponds to it. With the remission of this document, the Ministry of Foreign Affairs begins the formal process.

Good Corporate Governance plays a fundamental role. If the companies work well and open their shareholding, they allow access to investors who want to finance important projects in the long term.

Ecuador | Reforms to the Regulations of the Organic Law for the Regulation and Control of Market Power

by Juan Manuel González | Apr 3, 2023 | Noticias-en

Through Executive Decree No. 570 published in the Official Gazette at the end of 2022, the President of the Republic modified the Regulations for the Application of the Organic Law for the Regulation and Control of Market Power, with which changes are introduced to the current regime of competition law. Here is a summary of the most relevant changes:

1. Article 4 is reformed, introducing the standard of ” general welfare of consumers ” to determine the existence of an affectation to competition; and, therefore, anticompetitive conduct. Said reform establishes that this concept should be applied preferentially, which, in practice, implies that in its investigations the Superintendence for the Control of Market Power (“SCPM”) should preferably analyze whether the conduct investigated could lead to higher prices for consumers. The adoption of this standard is interesting, at a time when, worldwide, there is debate about the effectiveness or not of this criterion, particularly with respect to digital platforms.

2. In article 5, it is clarified that the calculation of the volume of business must be carried out according to the relevant market. This limits the calculation for the establishment of fines only to the sales of the economic operator in the market under analysis; something that already happened in practice.

3. In article 8, a subparagraph is added whose purpose is to limit what can be considered as a restrictive practice by object (a conduct in which, its mere existence, can be considered anticompetitive), only when there is a doctrinal consensus about its restrictive nature and the absence of potential positive effects; and that there are repeated decisions that have confirmed its anti-competitive nature. In practice, the ability of the SCPM to define a conduct as a restriction by object is limited, which would require a more in-depth analysis of its anticompetitive effects.

4. Through the reform of article 47, an operational structure is granted to the Regulation Board. The Regulation Board is a body directed by the Executive that can issue guidelines and regulations on the application of competition law.

5. Through the reform of article 105, the sanction for failure to provide information is restricted to the application of coercive fines only.

6. Finally, article 89 is repealed, thereby eliminating the obligation to establish a temporary auditor in cases of abuse of market power due to economic dependency.

For more information contact:

Daniel Castelo  | Senior Associate Bustamante Fabara | dcastelo@bustamantefabara.com