Key findings

Only 46% of Latin American companies have a formal sustainability policy or strategy.
Country-by-country analysis pinpoints Brazil and Chile as regional sustainability leaders.
Leaders cite sustainability disconnect with C-suite and lack of training as barriers to ESG progress.

RSM, the leading provider of assurance, tax and consulting services to middle market businesses, reveals that 57% of companies in Latin America lag behind the implementation of mandatory sustainability reporting standards.

The findings come in the network’s ESG Latin America Landscape 2024 survey which shares challenges and opportunities that 200 Latin American businesses are facing towards adopting International Financial Reporting Standards (IFRS) S1 and S2.

Although Latin American businesses appear to be turning their attention to sustainability, RSM found that only 46% have a formal sustainability policy or strategy in place, with also only 50% of businesses employing a dedicated Head of Sustainability.

Concerningly, 22% of businesses surveyed have not yet elevated sustainability to a strategic role or function in their organisations, making it a neglected topic outside of boardroom conversations.

Eileen Turkot, Regional Leader – Latin America at RSM International said: "In our research, it is evident that maturity in the adoption of ESG criteria varies significantly across Latin American countries.

“For example, in Brazil we see a more advanced approach to measuring social impact, while in Mexico, there is still a long way to go in terms of integrating sustainability as a strategic function within organisations. This reflects the different realities and challenges each country faces in aligning with global standards."

The survey found that while non-financial reporting is a critical area, many businesses are falling behind with only 40% of companies reporting publicly on their ESG practices. In the survey’s accompanying report, RSM highlights that businesses’ have greater success in implementing reporting standards when they are integrated with commitments and goals related to their strategy.

When businesses were asked to share their biggest challenges in advancing their ESG performances, 30% of respondents identified the generation of KPIs and their corresponding monitoring. A quarter of businesses also identified issues measuring their environmental footprint and social impact as challenging. 

Paola Piña, Leader of RSM's ESG Hub in Latin America, said: "Taking the findings of our survey, we would urge businesses that sustainability is not only perceived as a regulatory obligation, but as a driver of long-term profitability and access to more favourable financing. This appeals directly to the heart of corporate financial strategy, revealing an advancement in the state of maturity regarding the understanding and value of ESG development."

A lack of expertise from business leaders as well as resources within the organisation are identified as the biggest obstacles to improving ESG performance, with 22% stating so across the region.

Nuances within the region

Paola Pina added: "In some Latin American countries there may be less stringent regulations or little or no incentives related to ESG reporting compared to other regions such as Europe or North America, leading to a prioritisation of other business concerns. Thus, according to the survey, there are clear extremes. For example, only 32% of Mexican businesses have a declared sustainability policy, while Chilean companies reach 66%."


Central America: 

Although Central America follows a similar pattern to Latin America in ESG issues, there are some important nuances to highlight. According to the Central American companies that responded to the survey, 51% of these organisations have a Head of Sustainability or management position dedicated exclusively to sustainability, compared to the Latin American average of 43%. However, only 45% have developed a formal sustainability strategy. There is a great opportunity for progress in creating clear and robust policies.

Brazil: 

Due to the Amazon’s key role in regulating global climate and diversity, Brazil has an interesting degree of maturity in environmental issues. However, 47% of companies in Brazil report that KPIs and monitoring are the biggest challenge to their ESG performance. The incorporation of new technologies and solutions in this area is expected to drive improvement that will allow activities to be targeted towards meeting these goals.

Chile:

Chile is positioned within Latin America as one of the mature countries in the region regarding ESG. 66% percent of Chilean companies surveyed reported having a formal ESG policy or strategy, the highest rate in the region. Even so, 38% of Chilean companies indicate a lack of training and resources as a challenge to improving their ESG performance. Increasing internal training and knowledge, as well as having tools and support systems, are necessary actions to continue this progress. Additionally, 40% of Chilean companies indicate that pillar G (corporate governance) is a key issue for businesses’ commitment and their incorporation of sustainability. Companies that strengthen public reporting, internal policies and committed leadership can capitalise on improving the perception of trust and enhancing their reputation with investors and stakeholders.

Colombia: 

Colombia shows slightly above average progress. Its rate of public reporting on ESG practices is the highest in Latin America, at 51%. However, 31% of Colombian companies find it difficult to adapt to multiple ESG standards. This can be directly related to the type of regulations in the country, which, unlike other countries in the region, are more disaggregated and focused on specific issues, such as the circular economy. This clearly triggers the feeling of a lack of expert professionals in the field of sustainability who can carry out such a responsibility.

Mexico: 

The survey notes a very low percentage of Mexican companies publicly reporting on their ESG practices at 25%, probably due to the lack of regulations in place over the last few years. What is certain is that we expect this trend to clearly change in the next 12 months. This is due to new approved regulations and the change of presidential administration in Mexico. Under Claudia Sheinbaum’s presidency, she will bring a scientific profile and a greater inclination towards social and environmental policies in particular. In this sense, local companies will have to have a quick and solid reaction to be able to respond to the new requirements.