Navigating Sustainability Perspectives in Latin America: GRI

A study by the Global Reporting Initiative (GRI) analyzed the meaning of sustainability within the corporate departments of Latin American companies. Mexican executives, unlike their counterparts in the rest of the region, perceive sustainability more as philanthropic exercise benefiting society and the environment, rather than as a strategic element to increase the value of their companies.

The concept of sustainability is steadily growing within the business sector. According to SAP's study, Sustainability in the Leadership Agenda of Mexico and Latin America, based on interviews with over 500 Mexican executives, 24% of companies reported that they are currently in the process of implementing their own ESG strategies. These advancements suggest a future in which up to 79% of Mexican organizations could be driven by a sustainability-aligned agenda.

Corporate governance plays a pivotal role in the ESG panorama, acting as a catalyst for the strategic integration of sustainability principles into business operations. The commitment of the board and its members is paramount in ensuring that sustainability initiatives are driven from the top down, permeating the entire organization strategically and from a holistic perspective. However, it is common for company executives to associate sustainability more with philanthropy than a business strategy aimed at creating value for the company and its stakeholders.

GRI's 2022 study, Directing Sustainability from the Board, unveiled that in Mexico, 21.9% of corporate leaders perceive sustainability as their company's contributions to social and environmental causes, aimed at fostering well-being, social cohesion, and environmental stewardship. On the other hand, only 17.54% define sustainability through a business lens, seeing it as an approach geared toward generating long-term value for shareholders by capitalizing on opportunities and effectively managing risks stemming from economic, environmental, and social impacts.

The former approach to sustainability is greater in Mexico compared to the rest of the region. The study highlights that 23.21% of directors across Latin America define sustainability as the strategic management of a company's impacts, encompassing not only social and environmental matters but also economic considerations.

Ana Paula Jiménez, Country Senior Partner, PwC Mexico, highlighted the crucial need to educate all players in the business sector about the benefits of embracing ESG measures, such as lowering financing costs and improving health conditions. “Around 80% of CEOs in Mexican companies are currently prioritizing investments in automation and process digitization over ESG measures,” she noted during her participation in Mexico Business Summit 2023. 

The study by GRI gathered insights from 392 directors representing leading companies in Argentina, Chile, Colombia, Mexico, and Peru. The first report of this kind was published in 2016, featuring the input of 275 executives from the region. 

Andrea Pradilla, Director, GRI in Latin America, underscored that the most notable change over the years, has been the evolution in the understanding and role of boards in sustainability matters. However, there is a need to raise awareness among executives about the relationship between sustainability impacts and the generation of economic value for it to be genuinely integrated into the business direction. "We need to strengthen the understanding of sustainability from a more strategic perspective, viewing it as a business approach that seeks to create long-term value," she stated.