Corporations in Latin America are tuning up their impact strategies. Companies from Coca-Cola to AB InBev are deploying a growing set of impact vehicles (i.e., corporate foundations, funds, accelerators, incubators, and innovation areas) to address the yawning gap in finance needed to meet the Sustainable Development Goals in the region.
Latin America, with a gap of $650 billion, is one of the regions in the world with the greatest challenges in economic development.
As the United Nations Global Compact points out, all companies can and must contribute to the SDGs regardless of their size and sector. Today, it is about doing business responsibly and making a decisive contribution to solving the social and environmental challenges we face as a society and a planet.
The challenges in climate action, immense poverty and inequality, consumer demands, and market trends require innovative, articulated, and collaborative solutions driven by the private sector. Therefore, actions that put into practice this heightened awareness of the role corporate actors play in closing the SDG gap need to be implemented.
Sustainable development
As a sign of the trend for corporations to embrace these topics, approximately 83% of companies in Latin America have adopted the Sustainable Development Goals (SDGs) in their sustainability reports, but only 40% of these companies set measurable commitments on how their actions contribute to these goals.
While most companies are adopting indicators to measure and report their performance in sustainability and social responsibility, including initiatives to improve transparency, business ethics, and social equity, many other companies seek certifications and follow international standards such as the United Nations SDGs, the UN Global Compact, and the ISO 26000 Standard on Social Responsibility.
There is still a significant gap in corporate impact in the region compared to other regions such as Europe, North America, and Asia. This gap is undoubtedly exacerbated in Latin America, where there is a lack of policies that incentivize productivity, recent inflationary issues, and the dramatic economic consequences left by the Covid-19 pandemic.
Beyond this, there is a lack of comprehensive understanding of ESG criteria, impact, sustainability, SDGs, and social and environmental innovation. This prevents actors from working strategically and results in missed opportunities related to corporate purpose, as they respond immediately to a series of requirements to ensure their growth, diverting corporations’ commitment toward closing the SDG gap.
Corporate impact
To change this trend, we have identified the need for companies to achieve more effective and efficient articulation with their corporate impact vehicles to reach their purpose, strategically impact their business model, and contribute to the world with innovative solutions.
Although ESG, sustainability, and impact are interrelated, each focuses differently. Understanding these differences is crucial for companies and investors to make informed decisions and contribute effectively to global sustainable development. Starting from the conceptual differences can undoubtedly advance clear strategies that allow these decisive contributions.
The ESG criteria – environmental, social, and governance – are performance evaluation parameters that allow the evaluation of the corporate sector regarding these issues and are often used as sustainable investment indicators. They allow the evaluation of risks and opportunities that may affect the long-term value of a company and its attractiveness to investors to mitigate damages or benefit various stakeholders.
Companies with high ESG scores are seen as more sustainable and better managed. The reporting landscape regarding these criteria has changed dramatically, and it is becoming mandatory worldwide. There is much regulatory development that Latin American countries are beginning to adapt to based on developments in the Global North.
In turn, sustainability ensures long-term corporate operations balance economic, environmental, and social aspects to mitigate risks and avoid harm to stakeholders. Within sustainability, there is the Corporate Social Responsibility (CSR) and actions aimed at generating value for stakeholders with impacts on reputation.
On the other hand, corporate impact can be understood as the significant and intentional effect, changes, benefits, or deliberate consequences resulting from an intervention, a project, or the business model itself in the social, environmental, or economic sphere.
Unlike ESG and sustainability, impact focuses on specific outcomes and how these contribute to solving social and environmental problems while being integrated into the company’s business model.
Today, the challenge of corporate impact in Latin America is to articulate strategies towards a common purpose to deploy the resources allocated to impact more efficiently.
Case studies
In terms of impact, there are examples of how it is reflected in the strategic commitments of large corporations in our region. This is the case with AB InBev’s impact strategy in Latin America, which we have supported through Latimpacto with our Corporate Impact Program. Through entrepreneurship programs like Tenderas in Colombia, Belgian-Brazilian multinational is strengthening the capacities of small store owners, who make up a fundamental part of the company’s value chain.
We can also see an example of this in the case of Coca-Cola in Latin America by integrating impact into the holistic view of operations and its value chain with programs that encourage recycling by transforming stores to have sustainable collection points for PET and HDPE containers.
Additionally, some of these programs have supported 5,000 recyclers by providing them with cargo motorcycles to strengthen their recycling logistics and improve their quality of life, as well as collecting nearly 100,000 tons of plastic bottles annually to transform them into 50,000 tons of recycled resin, which is then turned back into packaging.
This has made Latin America the global leader in the Coca-Cola System’s use of returnable packaging, and it has also impacted the operation, the relationship with suppliers and customers, and the company’s circular management.
Corporate impact, in addition to its articulation with sustainability and ESG criteria, represents an opportunity for corporations to deploy integrated strategies that add value to the company and all of its stakeholders.
Impact vehicles
This is why at Latimpacto, we have been developing the corporate impact program, where we support corporations like AB InBev, Coca-Cola, and others with operations in Latin America to build and align their impact strategies with their business goals.
As part of this, through our peer learning program, we provide training cycles and connections based on exchange spaces on practical cases in corporate impact.
Undoubtedly, these actions will strengthen corporate management and the impact they generate in Latin America by encouraging the adoption of responsible practices and the implementation of sustainability strategies articulated with the actions of corporate impact vehicles.
The alignment of corporate business models and the actions of their corporate impact vehicles represents an active commitment to achieving the SDG targets.
Juanita Nuñez Betancourt is head of corporate initiative at Latimpacto.
Carolina Suárez Visbal is chief executive officer at Latimpacto.
