Brazil: Integration of ESG Criteria into Laws and Guidelines

published on 4 June 2024 | reading time approx. 3 minutes

Recent laws in Brazil reflect an increasing trend towards the integration of ESG criteria in various industries, demonstrating the country’s innovative and leading role in this context. These laws show Brazil’s concern and highlight the urgency to achieve better environmental conditions, the reduction of social disparities, ethics and transparency in both the public and private sectors, which are so important in the current times.

I. Tender Law – Law 14.133/2021 – Requirements for participation in tenders based on ESG

The Public Procurement Law no. 14. 133/2021 has introduced innovations in the public sector with regard to tendering procedures, i.e. the procedures used by the public sector to select companies or individuals for the supply of goods, services or works in order to ensure the best offer for the public sector, avoid favoritism and guarantee the proper use of public funds. The law promotes the consideration of sustainable practices by including relevant criteria in tenders, such as environmental impact assessment. Two key points are emphasized: (i) a significant reduction in the consumption of energy and natural resources and (ii) the effective implementation of reverse logistics and recycling systems for goods and waste. In the area of social affairs and governance, this is reflected in the promotion of social inclusion. Companies must prove that they are committed to filling 2 to 5% of their positions with rehabilitated persons or persons with disabilities. Tenders can also stipulate a minimum percentage of employees for women who are victims of domestic violence or who come from or have left the prison system.

II. CVM resolution 193/2023

At the same time, the Brazilian Securities and Exchange Commission (CVM) established guidelines for the disclosure of sustainability information on the capital markets with its resolution 193. This expands the integration of ESG practices and brings Brazil in line with the global standards established by the international Sustainability Standards Board (ISSB). This resolution requires the publication of sustainability reports based on the ISSB standard. These reports must be prepared separately and objectively for each company and made available via an electronic system on the CVM website. From 2026, this will be mandatory for listed companies, until then it will remain optional. This measure is intended to promote transparency and the environmental and social responsibility of companies. Securitization companies and investment funds can also adapt the standard voluntarily, provided they comply with the ISSB standards.

III. Equal Pay Act – No. 14.611

In addition, the Equal Pay Act No. 14.611 represents a decisive step towards gender equality in the labor market. By establishing clear criteria to ensure equal pay or men and women performing work of equal value, this law requires transparency in companies’ pay policies. It obliges companies to publish salary ranges and pay criteria in order to combat the unjustified gender pay gap. By promoting a fairer and more inclusive organizational culture, the law not only combats the gender pay gap, but also tightens oversight and penalties for companies that do not comply with equal pay regulations. This promotes fairer pay practices and recognizes talent regardless of gender. This not only benefits women, but also promotes economic and social development as a whole.

These measures underline Brazil’s pioneering role in adopting policies and regulations that promote sustainability and fairness and demonstrate its commitment to responsible and transparent practices at national and international level. They reflect the global trend to consider ESG criteria holistically. The aim is to promote more sustainable and responsible attitudes among companies and individuals, representing a significant advance in the integration of environmental, social and governance concerns into processes and contributing to the development of more sustainable and ethical practices in Brazil.

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