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• ESG Gaps in the Region: Only 46% of Latin American companies have formal sustainability policies, with significant disparities between countries.
• Barriers to Progress: Key challenges include C-suite disconnect, lack of training, and difficulty generating and monitoring ESG KPIs.
• Country Leaders: Chile and Brazil lead in ESG maturity, while Mexico shows potential for rapid change due to new regulations.

A recent report from RSM International highlights the challenges and opportunities faced by 200 Latin American businesses in adopting International Financial Reporting Standards (IFRS) S1 and S2 for sustainability. The ESG Latin America Landscape 2024 survey reveals that only 46% of companies in the region have a formal sustainability policy or strategy, indicating a significant gap in ESG commitment.

Country-by-country insights:

• Brazil: Known for its environmental maturity, particularly due to the Amazon’s role in climate regulation, Brazil leads in social impact measurement. However, 47% of companies find ESG KPI generation and monitoring to be the biggest hurdle.
• Chile: The region’s leader, with 66% of companies reporting a formal ESG policy. Yet, 38% cite a lack of training and resources as barriers to further progress.
• Mexico: Lags behind, with only 32% of businesses having a sustainability policy and 25% publicly reporting on ESG practices. However, new regulations and the upcoming administration under Claudia Sheinbaum are expected to accelerate progress.
• Colombia: Leads in public ESG reporting (51%), but struggles with adapting to multiple, fragmented ESG standards, impacting sustainability efforts.
• Central America: Shows potential with 51% of businesses employing a Head of Sustainability, although only 45% have a formal strategy in place.

Key challenges across the region:

RSM’s survey points out that 57% of Latin American companies are behind in mandatory sustainability reporting. Major barriers include a disconnect between sustainability initiatives and C-suite priorities, insufficient training, and a lack of internal expertise.

“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,” said Eileen Turkot, Regional Leader – Latin America at RSM International.

Companies cited the generation and monitoring of KPIs (30%) and measuring environmental and social impacts (25%) as significant obstacles.

Opportunities for growth:

RSM emphasizes that integrating ESG commitments into business strategies is essential for progress.

Paola Piña, Leader of RSM’s ESG Hub in Latin America, stated, “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.”

Regional outlook:

While regulatory frameworks and incentives vary, the region has clear leaders and significant gaps. As Latin American companies respond to new regulations and the evolving sustainability landscape, developing robust policies and enhancing internal training will be critical to fostering trust and long-term success in ESG practices.

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