3.1.2 Mandatory sustainability reporting

Below I give an overview of the state of the art of the mandatory requirements of sustainability reporting in Brazil.

There is no single environmental code in Brazil. As a federation of 26 states, environmental protection is spread in different environmental state regulations and enforced accordingly. Environmental protection is part of different environmental regulations, such as, Federal Law No. 6,938/1981, which established the National Environmental Policy, Federal Law No. 7,735/1989, which created the federal environmental protection agency (Instituto Nacional do Meio Ambiente e dos Recursos Naturais Renováveis) (IBAMA) and Federal Law No. 12,651/2012, which established the new Forest Code. The enforcement of environmental regulation is carried out by the different states. For example in São Paulo, the enforcement agency is Companhia Ambiental do Estado de São Paulo (CETESB). Also federal agencies such as IBAMA, and Instituto Chico Mendes de Conservação da Biodiversidade (ICMBio) are responsible for the enforcement of environmental laws.1

As a federative republic, Brazil’s corporate governance legislation is, similarly to the environmental protection, spread out in different regulations and not in a single code. Corporate Governance principles are, among others, part of the Brazilian Civil Code, in the section dedicated to limited liability companies; Law 6.404/76; Corporations Act; and the Brazilian Securities and Exchange Commission (CVM)’s rules for listed companies.

Since 2012, and in accordance with Resolution no. 254/2012/V/I, companies are required to submit an annual greenhouse gas inventory. For oil and gas, mining and chemical (among others) sectors resolution no. 64 obliges companies operating within those sectors to report their GHG emissions for obtaining environmental licenses in Rio de Janeiro. In addition, resolution no. 65 requires those companies to present a GHG emissions mitigation plan.

In 2010, a new Solid Waste National Policy was issued through the Law no. 12305/ 2010, requiring companies dealing with hazardous waste to report a solid waste management plan disclosing all relevant information.

For the energy sector, through Despacho 3034/2006 ANEEL requires a specific sustainability report to all energy utility companies operating in Brazil.

The Central Bank of Brazil (BACEN) is the regulator and supervisor of the financial institutions in Brazil. It has the mission to ensure a sound and efficient financial system, which implies fostering sustainable development and consequent incorporation of Environmental, Social and Governance risks in its strategy and internal policies. Since 2004 the BACEN has been rethinking its role within society.2 The BACEN issued on the 13th of June of 2012 a proposal for two resolutions: a new Socio-environmental Responsibility Policy (PRSA) to set minimum standards for Brazilian financial institutions to comply with;34and a socio-environmental report by the largest financial institutions. The hearing closed on the 11th of September of 2012. Since the 25th of April of 2014, under the Central Bank of Brazil’s Rule 4327, the largest Brazilian financial institutions are required to issue a socio-environmental report, and for all the financial institutions to develop a Socio-environmental Responsibility Policy, to adopt an action plan and make public their stand on these issues. The BACEN does not specify what needs to be included in the policy, it does not prescribe how and which framework to use as it depends on the specific market segment and business strategy of each financial institution.5 Rule 4327 is a pioneer initiative for the Brazilian largest banks.

Brazil hosted the largest environmental conference ever held, the United Nations Conference on Environment and Development, also known as the Earth Summit.6 The major outcomes of this conference were, among others, the Framework Convention on Climate Change,7 the Agenda 218 and the Rio Declaration on Environment and Development.9In 2012, once again Brazil hosted the United Nations Conference on Sustainable Development held in Rio de Janeiro, also known as the Rio+20 or Rio Earth Summit 2012.10 The main outcome from the Rio +20 was the document “The Future We Want” renewing the Heads of State’s “commitment to sustainable development and to ensuring the promotion of an economically, socially and environmentally sustainable future for our planet and for present and future generations.”11 Eventually, both events led to the Kyoto Protocol and the Paris Agreement.

On a Federal level, to meet voluntary commitments to reduce GHG emissions in Brazil, the Government has emitted Federal Decree No. 7,390/2010, establishing the creation of Sector Plans (e.g. deforestation, energy) to apply actions, indicators and targets to reduce GHG emissions and compliance mechanisms. Sector Plans were established to enable the enforcement of the National Policy on Climate Change (Law No. 12,187/2009).12 However, lack of enforcement has been the main reason for preventing the Brazilian GHG emission reduction targets to be met.13

Brazil is a party to the United Nations Framework Convention on Climate Change and a signatory to the Kyoto Protocol since the 29th of April of 1998, and it has been a leader when compared to other developing countries.14

The Brazilian President, Michel Temer, signed the Paris Agreement on the 12th of September of 2016, assuming its commitment to the objectives of keeping global warming well under 2 degrees comparing to 1990’ levels.15 Brazil has committed to cut GHG emissions by 37% until 2025 and by 43% until 2030, compared to the levels registered in 2005.16 The Brazilian commitments have been criticized given the average reduction of 40% between 2005 and 2012, when reducing 80% of deforestation.17 As of 9 of September 2016, 27 countries have ratified the Paris Agreement; yet, the agreement will only be effective 30 days after 55 countries have ratified it.