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Corporate sustainability - The current context

Sustainability can be defined as the ability to meet our needs in the present without compromising the ability of future generations to meet their needs. Currently, at the business level, sustainability is already a key issue for the competitiveness of companies as well as the purpose of creating value. The concept of sustainability has been evolving, leading to the new "ESG" term, that stands for Environmental, Social and Governance (by its acronym in English). This term refers to a set of non-financial (sustainability) factors that can influence an organization's activities or vice versa, and that have gained great relevance among investors and other stakeholders over the past few years.

Environmental factors (E) can include topics such as water management, waste production, biodiversity protection, energy management or climate change mitigation and adaptation. Social issues (S) focus on topics such as labor relations, human rights, health and safety, product responsibility, among others. And finally, governance issues (G) can cover topics such as business ethics, shareholder rights, anticorruption, independence, diversity in corporate bodies, among others.

Stakeholders, and in particular the capital markets and the investor community, demand a clear and tangible link between relevant ESG issues and corporate strategy, material risks and their management. In this sense, the demand for greater detail and transparency in non-financial reporting (sustainability or ESG) is increasing.

We have seen an accelerated evolution of ESG issues from a niche market to a dominant position. This evolution has accompanied the demand for this type of information by investors, in order to understand the value creation and long-term strategy of organizations, as well as the future vision and quality of management, throughout the entire value chain.

In this sense, the number of ESG regulations and standards has increased significantly in the last decade. Within this batch, we find voluntary

frameworks, developed by the “Big-5” of ESG reporting, composed by entities such as CDP, CDSB, GRI, IIRC and SASB (these two latter entities having recently formed the Value Reporting Foundation).

On the other hand, the European Union (EU), as a pioneering organization in Europe on the development of ESG legislation, guidance and recommendations, has developed several related initiatives in recent years, e.g. Non-Financial Reporting Directive (2014), European Strategy on Plastics (2018), EU Action Plan on Financing Sustainable Growth (2018), European Green Deal (2019), EU Action Plan for the Circular Economy (2020), Sustainable Finance and European Taxonomy (2021), Proposal for a Corporate Sustainability Reporting Directive (2021), 'Fit for 55' Package (2021), among others.

Linking ESG factors to the corporate strategy and executive compensation helps companies to create and preserve long-term value for their shareholders and other stakeholders. In this sense, the first step starts with senior management. An involved management is the main owner of the organization's ESG strategy, helping to identify and manage material ESG issues, developing short, medium and long-term strategies to address the different ESG risks and opportunities.

Experience of Grupo Conceito (BearingPoint)

Grupo Conceito, through its associate BearingPoint, and with a team specialized in sustainability and climate change consultancy, provides its clients new business services, aimed at addressing ESG challenges and improving the performance of organizations. BearingPoint's team develops projects in different areas of expertise, namely: strategic sustainability advice; climate change; performance management and continuous improvement; disclosure of non-financial information (ESG); ESG indexes and external recognition, among others.

It is part of the Grupo Conceito to provide our customers with new services that contribute to increase their competitive advantage and strengthening their position in the market.

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