IRJ investigates - Roll call 2012: Leading Brazil’s 2012 Corporate Sustainability Index

The sustainability tag may be embedded in vague common parlance (irritatingly) in some respects, but it takes more than green grandstanding and sweeping declarations for industrial and mining groups to make it into BM&FBOVESPA’s Corporate Sustainability Index (ISE).

Subsequent to founding through a merger between the São Paulo Stock Exchange (Bovespa) and the Brazilian Mercantile and Futures Exchange (BM&F) in May 2008—becoming one of the largest exchanges on earth—BM&FBOVESPA has proved vocal when it comes to attaching social, economic and environmental accountability to generating long-term value for shareholders. It has masterminded various means for measuring each of these, the most prominent of which is its Corporate Sustainability Index (Índice de Sustentabilidade Empresarial or “ISE”) launched in 2005.

Spanning 18 sectors totalling market cap worth around 961B billion (Brazilian Real)—43.72 per cent of all BM&FBOVESPA companies listed at the time of release—the 2012 ISE was announced on November 25, 2011.

Entrants will remain on book from January 2, 2012 to December 31, 2012, and the leap from previous index figures at 43 stocks from 34 companies to 47 shares from 38 companies has got plenty of attention. The efforts made by selected and applying groups vying for inclusion have warranted the ISE to implement a cap of 40 groups; a move made to encourage would-be listings to stay competitive and to foster diversity among those listed.
Gracing the board for 2012 are household names in natural resource and heavy industry.

Here are IRJ’s top three from the ISE.

Steel manufacturing:

The Gerdau Group
(BM&FBOVESPA: GGBR3. GGBR4) (“Gerdau”)
ABOUT: A product of over 110 years in the making, Porto Alegre-headquartered Gerdau is America’s biggest long steel producer with an installed capacity of over 25 million metric tons steel per year. Its industrial operations span 14 countries including Brazil (naturally), Chile, Canada, Guatemala, the U.S. and Spain to name a few.

Servicing buyers in the civil construction, industrial and agricultural sectors for the most part, Gerdau provides steel products through a model based on buying locally and selling in the same fashion. It’s an admirable approach, reducing pollution by transportation to market, fostering local level industrial development, sourcing regional workforces and maintaining a diverse customer base—and with some 48 wholly-owned steel mills (plus two joint ventures), 32 scrap collection and processing facilities, two private port terminals, 94 fabricated reinforcing steel facilities and a litany of other owned, associated and partner sites, it plays to many company strengths.

WORTHY OF THE ISE? Gerdau says that its principles of sustainability reflect a company-wide belief that “the economic growth of a company is based on an ethical and socially responsible relationship with the environment and with everyone related to it: employees, customers, suppliers, shareholders, government and society”.

From a business perspective, it hires locally (to the tune of 45,000 employees), provides materials for infrastructure development and “plays a role in the growth of cities”. Environmental efforts include investing in recycling technologies to reduce reliance on natural resources, and research to optimise its usages for by-products.

IN THE NEWS: On January 16, reacting to the U.S. Environmental Protection Agency’s (“EPA”) decision to publicly release industrial emissions figures online for the first time, Gerdau Special Steel North America released a statement regarding its inclusion on a national list of heavy emitters.

“This reflects data provided by Gerdau to the federal agency in keeping with its commitment to transparency and corporate responsibility. While the EPA does not set specific limits for carbon dioxide emissions, Gerdau complies with the requirement to measure and report such emissions, and has implemented efforts to continue to reduce them through productivity efficiencies in the steelmaking process at all mills, including those in Michigan,” the company stated.
“Gerdau is committed to maintaining environmental standards in all the communities in which the company operates”.

Mining & energy

VALE S.A
(BM&FBOVESPA: VALE3, VALE5) (“VALE”)
ABOUT: Global iron ore leader and formerly private-owned mining giant VALE is the first miner to hit the ISE and 2012’s run down marks its second consecutive year on the list. The Rio de Janeiro-headquartered group is active in 16 Brazilian states and internationally from Angola, to Mongolia, to London.

Between its 1942 founding as a Brazilian Federal Government public entity and its ascent to a multibillion real group with over 174,000 people (2010) in its employ, VALE has become (and remains to be) the world’s biggest exporter of iron ore as of 1974; privatised (May 6, 1997); and owner of Canada’s second largest miner, Inco, for US$18.9 billion (October 2006). Its Sustainable Development Policy was established on January 2009 to address social, economic and environmental responsibility across global operations.

WORTHY OF THE ISE? 2010 proved to be a pivotal year when VALE’s first sustainability report prepared in line with Global Reporting Initiative (GRI) methodology hit the stands, the first VALE Science and Technology Community Seminar for Sustainable Development was staged in Ouro Preto, Minas Gerais, and its entrance into the 2011 ISE roll call was announced.

Structurally, the company has established intertwined initiatives stretching from biodiversity to climate change and a healthy portion of green within research and development.

The VALE Technological Institute (ITV) launched in 2009 covers everything from iron ore industrial processing technologies to the more abstract evaluation of ecological scientific interests.

The VALE Foundation is active throughout Brazil and local foundations in Colombia and Mozambique, and it forges public sector and social partnerships in order to “strengthen human capital and contribute to communities’ social and economic development, leveraging Vale’s social investments”.

Additionally, programmes in the realms of human rights, government relations and environmental management pepper company endeavours at various levels.

IN THE NEWS: Coverage hasn’t been entirely rosy for VALE lately. As debate over the 11,233 megawatt Belo Monte dam project on the Amazon’s Xingu River plays out, the company’s name has cropped up. In Belo Monte’s development company, Norte Energia, VALE holds nine per cent, and this has sparked rumours that future project output may support energy-intensive, high polluting industries and result in environmental detriment.

More agreeably, in a December interview VALE’s vice president of sustainability, Jennifer Hooper, detailed company plans for a US$2 billion environmental project to reduce sulphur dioxide emissions at their Sudbury smelter in Toronto; the largest project of its kind.

Petrochemicals:

Braskem
(BM&FBOVESPA: BRKM3. BRKM5) (“Braskem”)
ABOUT: São Paulo-headquartered Braskem is the continent’s biggest petrochemical player by capacity and the fifth biggest globally by the same measure. Within its 18-odd plants capable of producing 11 million metric tons in petrochemical and other chemical products annually, it owns the Camaçari (Bahia) and Triunfo (Rio Grande do Sul) plants; the largest chemical plants in Brazil.

In addition to reigning supreme as Brazil’s main polyethylene and polypropylene producer, it employs approximately 6,400 people; a sizable workforce given its 2002 founding.

Boasting the tagline “The perfect balance between development and sustainability,” and wielding a firm focus on “sustainable chemistry,” the group’s operational efforts in greening its business activity have proved impressive.

In September 2010 Braskem inaugurated its green ethylene plant as part of its Triunfo petrochemical complex in Rio Grande do Sul. The plant will produce 200,000 tons of green ethylene destined to become green plastic, and, given that it is the largest industrial-scale operation producing ethylene from totally renewable raw materials on the planet—designed and constructed in less than two years—it reflects rapid company growth and capability.

WORTHY OF THE ISE? Braskem’s sustainable development goals are refreshingly detailed, conveying aims ranging from “being a benchmark for chemistry safety” to “being the largest producer of thermoplastic resins made from renewable raw materials” and the aptly linked “helping reduce the impacts of post-consumption plastic waste”.

Its year-on-year goals to 2020 are equally well-structured. By 2015, Braskem aims to lead Global Product Strategy implementation in South America, and by 2020 the group intends to cease use or production of substances included on global blacklists.

This is the seventh consecutive year that Braskem has made it onto the ISE. Statements note that both its biopolymer research and development and commitment to health, safety and the environment are part of its reasoning in the 2012 selection process. Furthermore, the company states that it has “improved its eco-efficiency indicators, reducing waste generation by 67 per cent, effluent generation by 39 per cent, energy consumption by 15 per cent and water consumption by 19 per cent”.

IN THE NEWS: Between November’s ISE 2012 announcement and the year commencing, Braskem picked up the 2011 Eco Award for best sustainable project in the Products or Services category for its green plastic from sugarcane ethanol, and the 2011 Guia Exame de Sustentabilidade (again) which named the group as one of Brazil’s “model-companies for its commitment to social and environmental responsibility issues,” with a nod to its green chemicals work.