The importance of environmental, social and corporate governance (ESG) best practices is becoming increasingly visible in the region, as we have seen in previously published articles that included the opinion of experts from prestigious legal firms.

In recent years, due to the increased demands of investors, governments, consumers and interest groups in general, companies have had to rethink the way in which they develop their businesses, setting strategies for the incorporation and application of ESG criteria.

In the central and southern region of the continent, companies must understand the needs of customers and the community in which they produce their goods or services to make sustainable decisions. It is true that changing suppliers or materials to create a sustainable product is not cheap, but -as we have seen in the note “ ESG to generate shared value and new business ”- the long-term benefit is worth the effort.

The competitiveness of Latin American companies is a necessary condition to go out into the world and generate new markets. This intangible asset can be sustained with a solid ESG strategy, delivering a differentiating value proposition. As stated by Gerson Vaca, Partner of Basham, Ringe y Correaof Mexico “in terms of competitiveness, we believe that there is a triple added value. Today it is common practice for international companies to require their business partners and members of their supply chains to comply with ESG principles. By virtue of the above, a company that has an established ESG program will allow it to increase the scope of its business by complying with this increasingly requested requirement or otherwise, it will not be considered by these international companies”.

Companies that comply with ESG metrics offer an important competitive advantage as they are more profitable in the long term while complying with national and international standards that allow the attraction of socially responsible investments where investors seek to guarantee that their assets finance companies whose development it is done consciously benefiting the environment and society.

In this way, these topics are ceasing to be a prerogative for the business world, becoming a standard. . “All these strategies are non-financial factors that allow companies to analyze their risks and opportunities for growth, providing fundamental value for investors. ESG strategy and investments are becoming an important and growing part of the investment process in every company,” says Vivian Liberman, partner at BLP Central America.

But competitiveness is not the only north that the region looks to in terms of ESG. Measuring the impact of these strategies is a practice that is imposed because everything that can be measured can be improved .

A well-executed sustainability and compliance program should have short, medium, and long-term goals. “ESG compliance programs must include an implementation plan, as well as the metrics on which it will be analyzed and reviewed if these goals were met or in what percentages they have been achieved and what are the reasons why they were not achieved and ways correction, so the same program must establish the way in which its proper application will be measured”, Vaca details.

For Florencia Fuentealba, Associate of the Compliance Group at az in Chile: “When adopting an ESG strategy, it is not enough to make statements of value only, but as is done with financial factors, companies must incorporate objectives, goals and metrics to assess your 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 it should be reconsidered”.

There are various metrics and companies dedicated to measuring the relative performance of companies in terms of their ESG attributes, Liberman explains. “The commitment acquired and the effectiveness of the changes made in their operations, practices to qualify the effectiveness with which they manage to comply with ESG issues can be measured.”

Another factor that organizations in the region are paying attention to is their own resources. These ESG strategies are also a motivational medium for both investors and workers. Respect and awareness of the environment, of social issues and transparency in how a company behaves are values ​​for retaining talent and obtaining investment. They collaborate in the identification of risk and growth opportunities. They generate high value in new types of business with corporate culture. Currently, the markets are focused on a circular economy and a new model where the response to environmental and social challenges are essential for companies and the economy.

The experts from the firms that make up Compliance Latam agree that 2023 will be a year in which  sustainability will be a protagonist on the business agenda and is consolidated as a great opportunity  to align business activity with the response to social and environmental challenges.