A Legal Framework for “Corporate Recoupling” in Brazil

Photo Credit: Pixabay

2020 has been a year of catastrophic natural hazards and popular uprisings, certainly a historical moment in the making. Orthodox economic principles are being questioned and dismissed, as a regenerative agenda is being pushed forward by progressive agents around the globe. In this context, holistic methodologies like the T-20´s recoupling dashboard could provide policy makers with a powerful tool to converge social and economic prosperity with environmental performance.

This is no surprise for the engaged parties in sustainable development, replacements for a GDP-driven economy have been discussed for decades. Nevertheless, the bridge between these approaches and the corporate universe, which is tied to the evolution of the private sector’s positive impact assessments, posits some defining provocations. Which legal provisions could effectively leverage these sustainability and prosperity indexes in the corporate ecosystem? Even more ambitiously, how can these aforementioned indexes hold company’s governance structures accountable for not meeting the most pristine and evolved principles for human and planetary welfare?

It is true that ESG-metrics and their ample universe of ratings and indices have been widely used by banks, investment funds and rating agencies. These provide a voluntary approach to set the benchmarks for the purportedly best practices in the impact investing market. Yet, they fall short of encompassing the ever-growing necessities of companies that are overcoming the paradigms of an outdated shareholder capitalism, focused only on a profit maximization perspective.

A Legal Framework that Supports Positive Impact Businesses

In reference to the policy brief regarding “Scaling up business impact on the Sustainable Development Goals (“SDGs”)”, it seems inevitable that a new legal framework could and should significantly empower civil society, governments and businesses. Moreover, this is inescapable from the notion that we are experiencing a necessary transition to a stakeholder capitalism.

Firstly, this agenda focuses on pushing governments to pass legislation that sets a clear definition of what the term “positive impact businesses” stands for, creating clear guidelines for environmental, economic and social parameters that will orient the legal framework that will follow. Simultaneously, the private sector needs to be effusively engaged in enticing public entities for the creation of impact-oriented corporate structures. There are many initiatives following these trends worldwide, with varying structures and outcomes, such as Benefit Corporations in the USA, Italy, Colombia and now Ecuador, and their mirrored models in other countries, like the “Enterprise à Mission” in France, or even Steward Ownership models of Purpose Economy, already largely adopted in the Scandinavian countries.

These solutions, in their rich variety of propositions, defy “business as usual” assumptions, converge the triple bottom impact to the core of their missions and in some degree, redefine ownership and stakeholder relationship. This is no ordinary challenge, but it stands at the forefront of the redefinitions of capitalism for this century. All enterprises, should be taking into account these approaches, understanding their interdependence in a societal context operating within planetary boundaries.

Brazil: A Leading Case for Regenerative Practices

Latin America, and more specifically Brazil, the home to both authors of this article, is especially receptive to these initiatives. With a dormant potency in nature-based solutions, the country stands alone as the guardian of major hydrological resources, large rainforests and not to mention the most biodiverse savannah region in the world, our beloved Cerrado biome.

Understanding Brazilian entrepreneurial ecosystem gives one a keen perspective on how lacking and inconclusive our legislation is for giving incentives to companies who adhere to the guidelines of impact investing and social businesses.

Aligned with this ideation, specific corporate structures will be defined in order to capture the spirit of a new post-capitalist order, giving preference for these types of businesses to be eligible for tax exemptions and preferential access to public funds. Brazil’s corporate law is limited to a few corporate structures to choose from, but there is still plenty of room for innovative mechanisms and creative solutions. With so many bureaucratic barriers and rising inequality, for-profit businesses which are born with ecological and social missions, sustaining governance structures which are aligned with perpetuating these pillars, should have the upper ground when accessing markets, public or private.

Standing as a beacon of hope, the Brazilian state of Rio de Janeiro, well known for having hosted the United Nation’s Earth Summit and Rio+20 in 1992 and 2012, respectively, has issued Decree 8571/2019, creating a legal framework for positive impact investments and businesses, setting definitions and rules for a receptive environment in this area.

Corporate Activism and New horizons

In a world where traditional business models have accounted for resource depletion and social fragmentation, new regenerative proposals should be the priority for entrepreneurs and companies who wish to be agents of change. It is a pivotal moment for the corporate universe to shift to being part of the solution. In the wake of this movement, developing countries should be at the vanguard of creating laws and regulatory sandboxes for companies who are born with the features outlined in this article.

 

An article by João Bernardo Casali and João Daniel de Carvalho.

___

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of the Global Solutions Initiative. 

___

The authors are members of the extended circle community of the Young Global Changers program.

João Bernardo Casali, Chief Regeneration Officer and Co-Founder of the Impact Agency Iönica, a certified B-Corp & Co-Chair of the Noronha Municipality Plastic Free Initiative. Founder of the Legal Impact Lab, Public Policy Project for Impact Law Promotion. Board Member of Sistema B Brasil, Sinal do Vale & Rio de Janeiro B-Corp Community. Impact Entrepreneur, Business & Public Policy Consultant, Corporate Activist, Lawyer, Specialist in Environmental Management & New Economics.

João Daniel de Carvalho, Consultant at Iönica and the Legal Impact Lab, partner in Maltz Santos & Carvalho law firm and founder of Lobeira Environmental Consultancy.

Register for Updates

Would you like to receive updates on the Global Solutions Initiative, upcoming events, G20-related developments and the future of multilateralism? Then subscribe here!

1 You hereby agree that the personal data provided may be used for the purpose of updates on the Global Solutions Initiative by the Global Solutions Initiative Foundation gemeinnützige GmbH. Your consent is revocable at any time (by e-mail to contact@global-solutions-initiative.org or to the contact data given in the imprint). The update is sent in accordance with the privacy policy and to advertise the Global Solutions Initiative’s own products and services.