IGS System: A CEPEL solution for showing to the market how to deal with ESG issues
The World Economic Forum points out that GDP should no longer be considered an accurate measure of economic growth. The three pillars of the ESG concepts and practices are the basis of the organization’s guidelines to address the issue. At the micro level, The Boston Consulting Group – BCG, a leading global player in business strategy consulting, considers that companies that have good practices in these fields deliver better results over time.
In this context, managers and investors from Europe, the United States, Canada and Australia, among other countries and regions, add the ESG practices to their risk and investment analyses.
With the CoViD-19 pandemic, the boom of investments called "sustainable" or "responsible" were intensified, affecting investors' decision making. The current world situation and uncertainties have caused a significant drop in the profitability of traditional funds. But according to the Brazilian Association of Financial and Capital Markets Entities (ANBIMA), the ESG funds have fallen much less.
It is not by chance that the Brazilian Stock Exchange, B3, has restructured the indexes which support investors in their decision making such as ISE B3 (Business Sustainability Index) and ICO2 B3 (Carbon Efficient Index). Since 2020, B3 has introduced measures to stimulate listed companies to adopt ESG practices acknowledging its contribution to business’ continuity. And, in partnership with Standard & Poor's (S&P) has created the S&P/B3 Brazil ESG index.
CEPEL is aware of this scenario and has been monitoring the progress of business performance indicators for years. In order to meet a demand from the Eletrobras Environment Committee, the Center has started the IGS Project (Indicadores para Gestão da Sustentabilidade, in Portuguese initials). The target was to develop a tool for monitoring and analysis of the key aspects of the Group’s socio-environmental management through indicators. Eletrobras group is responsible for over 30% of energy generation in Brazil and owns over 40% of the transmission network assets. The IGS Project has evolved and, today, is a system which has two components: IGS 2.0 and IGS-Relat.
IGS 2.0 collects data via the Internet, lists the stored information and produces summaries and reports, allowing the user to perform different types of analyses, for both operational and management activities.
Researcher Katia Garcia, manager of the IGS Project, comments on the main differentials of the product, in comparison with similar products available on the market: "IGS 2.0 is fully customizable and can be adapted to any company. The system allows greater flexibility in data storage, in variables and indicators definition, in data collecting periodicity and in the homologation processes. Moreover, the reliability of the information provided is ensured by a chain of approval, which allows tracking and identification of its origin, facilitating corrective actions. As it is all encrypted, the system ensures information security”.
She continues: “currently, all Eletrobras companies use IGS 2.0. There are about 1,000 users spread over more than 350 operating units, monitoring about 300 KPI (Key Performance Indicators) from areas such as business performance, environment and sustainability, research, developing and innovation, related to power generation (hydro, thermal, wind), electric energy transmission and support to the system operation. This information is used not only to communicate the results achieved by the companies in their Sustainability and Administration Reports but also to create the Greenhouse Gas (GHG) Emissions Inventory, the questionnaires for the investors required by B3, Dow Jones and CDP (Carbon Disclosure Project), and to follow-up on the 2030 Agenda for the UN's Sustainable Development Goals (SDG).
IGS 2.0 is integrated with IGS-Relat and the Emisfera platform also developed by Cepel. IGS-Relat enables the user to elaborate Sustainability Reports that are fully aligned with the methodology of the Global Reporting Initiative (GRI), one of the most renowned and respected organizations in the world dedicated to stimulating and disseminating ESG practices. Sustainability Reports are considered to be an ESG practice because they disclose to the market the company's performance in economic, environmental, social and governance issues.
The Emisfera platform allows the user to calculate GHG emissions resultant from company or corporation activities and to monitor emissions reduction targets. It can identify cases of good practice by detecting initiatives that lead to significant emissions reductions. The platform is also useful to elaborate decarbonization plans, since it can indicate the biggest GHG emissions gaps. Alexandre Medeiros, a Cepel researcher who is part of the project's team, also points out that "for six years, the platform tools have been submitted to independent auditing, which attests to their compliance with international accepted methodologies for calculating corporate GHG emissions".
Katia assures that, with the use of the IGS System or one of its components, companies achieve greater agility and reliability in collecting and analyzing information related to the ESG issues. "There is no doubt that the IGS System definitely contributes to structure information about company´s performance related to the ESG practices and this is reflected on the recognition of these initiatives by the market". The evidence of this is the positioning achieved in 2020 by Eletrobras in the Dow Jones Sustainability Index (DJSI): the company won the S&P global award's "Bronze Seal" and grade "A" (leadership on the climate change topic) in the CDP.
Despite continuous improvements, the IGS System is ready to be delivered to the market. "After a long time of developing and improving the system, we believe that today it is mature to be introduced to the market, for companies in the power sector, or even in other sectors", concludes Katia.