Market behind the times

Companies listed on stock exchange reject social and environmental reporting requirement

Brazilian companies listed on the stock exchange rejected in a vote last Friday, June 23, the requirement to publish social and environmental reports established in the updated rules of the so-called New Market – a special listing segment for public companies that agree to adopt the most advanced corporate governance practices.

Special listing segments are categories created by the stock exchange to rank, group and recognize companies based on different degrees of transparency and management practices. Currently, the New Market is considered the most demanding segment, since it reflects internationally recognized standards, exceeding what is required by Brazilian legislation.

The result of the vote – announced by B3 (the company created from the merger of the BM&F Bovespa stock exchange and the Cetip clearing house) on Monday, June 26 – revealed, however, the reluctance of Brazilian companies to adhere to higher standards of transparency, governance and social and environmental responsibility.

In the New Market segment, 50 companies voted against the reporting requirement, 47 voted in favor and 32 abstained. Of the companies listed in Level 2, which is a sub-segment of the New Market in which the requirements are not quite so strict, there were 12 votes against, 5 votes in favor and 2 abstentions.

“We can see that most Brazilian companies still do not have a long-term and updated vision of sustainability. It is regrettable that companies listed on the most advanced segments of the stock exchange do not view transparency as essential for overcoming the crisis and for the development of a dynamic and competitive market that is committed to human rights and the environment,” said Caio Borges, coordinator of the Business and Human Rights program at Conectas.

The vote was part of a consultation process to update the rules of the special listing segments, which began in March 2016. The companies from the New Market and from Level 2 were asked to cast their vote on a new regulation and on four specific rules, one of which was the publication of social and environmental reports.

According to the proposal by B3, the social and environmental reports would have to follow the standards of the GRI (Global Reporting Initiative), which is currently the most used guideline for sustainability reporting worldwide.

• The list of how each company voted can be found here.
• The final result released by B3 is available here.

The result of the vote, said Borges, “represents a missed opportunity to bring the Brazilian capital market up to speed with the best international practices”. “In the European Union, for example, there is a directive that requires companies with more than 500 employees to publish a series of non-financial information for the purpose of raising transparency on social and environmental matters,” he added.