The “G” in ESG stands for “governance”. The root of the word governance, in turn, comes from a Greek word meaning direction. The term Environmental, Social, and Governance (ESG) was created as a metric to obtain analytical and comparative data and to outline strategies for the future.
Corporate governance organizes the principles and processes within a company, defining the controls and procedures that the company will use to govern itself, make decisions, follow the law, and meet the needs of all stakeholders: employees, suppliers, shareholders, and investors.
Good governance promotes transparent management by disclosing financial and non-financial information in a way that is clear and accessible to all and implements ethics that promote the trust of investors, employees, and the public.
When we apply the concept in a company or project, we implement a system to identify, assess, and manage risks. This system minimizes the possibility of future risks and establishes processes to be carried out when and if the detected risks arise.
Good governance is essential for mitigating risks and improving long-term financial and operational performance. And that’s what makes it an essential pillar for effective management!
The basis for all ESG initiatives
Faced with the current scenario, where environmental problems – such as the climate crisis – are happening at the same time as the intensification of discussions on human rights and the increase in social problems, companies have been pushed to implement governance systems guided by a vision of their role within those issues.
Both consumers and investors are demanding that they show commitment to improvement and positive impact actions that make a difference and contribute to sustainable development. These aspects also include ethics and integrity, information security, data privacy, public relations, risk management, and indicators that establish effective rankings for measuring actions. This has led investors to choose to invest in companies that apply them, or in other words, that use governance.
For these and other reasons, I would say that governance is the basis of all ESG initiatives, practices, and projects, as it ensures that there is cohesion between any company achievements and the business objectives.
An increasing percentage of consumers and investors are choosing to support and invest in companies that contribute to positive impacts on society and the environment. And this is only possible by ensuring that the actions of organizations are aligned with the public interest.
How we use governance at Raízes
Here at Raízes, we have governance in place both for each project and for the company as a whole.
From the point of view of finances, the area in which I collaborate most, budgets are made very carefully, evaluating each step of the project. When the project begins, its expenses are monitored, guiding the team involved to ensure that they are within the plan. At the end, we evaluate each item in the project, checking the differences between what was budgeted and what was spent, and this analysis helps us with new budgets.
In the company as a whole, we monitor the launches daily and have a future cash flow plan for 1 year ahead, enabling the board of directors to draw up panoramas and make decisions based on data. In this analysis, we draw up scenarios for decision-making.
The constant exercise of governance is part of our culture and helps Raízes to be a financially healthy company committed to all the letters of ESG.
How about you? Do you also seek to understand the social and environmental impact of what you consume?
