There is no strong economy with weakened companies

By Sergio Leão for Folha de S. Paulo

After Operation Car Wash, organizations underwent transformations and renovated themselves

Sergio Leão

Source: Folha de S.Paulo

In recent years, we have been impacted by revelations of corruption involving major companies in both Brazil and other countries. A meticulous investigation and the collaboration of executives from the companies investigated and others involved resulted in a turning point in the relationship with the public sector, especially in the engineering and infrastructure sector. But a more comprehensive look into this scenario and the future of upright companies in Brazil shows that we have more reasons to be optimistic than otherwise.

A group of large Brazilian companies, for example, implemented new processes and governance and control systems. The changes are broad and are already in practice. An independent report by the NGO Transparency International in 2018 about the transparency of corporate reports of the 100 largest Brazilian companies showed results that leave no doubt about the progress, compared to companies in other emerging economies such as Russia, Chile and South Korea.

In the report, the engineering and construction sector in Brazil, one of the most heavily affected by Operation Car Wash investigations, obtained the highest average for anti-corruption programs compared to the other 14 corporate sectors in Brazil. The report also shows the need to improve other aspects of information disclosure, especially in the transparency of organizations and their operations in various countries.

Companies are aware that they will not survive in environments where corruption, as it used to be, is a way to obtain advantages in business. And since they are imbued with this, they are currently engaged in initiatives that lead to changes beyond their scope, as well as in their relations with the market and government entities. These are the so-called collective action initiatives, such as the Business Movement for Integrity and Transparency of the Ethos Institute and other initiatives led by Transparency International and the Global Compact in Brazil.

One recent example was the proposal made by companies, among them Odebrecht, and the Ethos Institute to establish the Observ Institute. This initiative is based on an open platform accessed through the Internet, which incorporates data search and analysis mechanisms to monitor, inform and give greater transparency to bidding processes for public works.

This effort towards change, both internally and in their relations with society and the government, shows the profound transformation undergone by companies, which not only cooperated with the investigations and fulfill their obligations undertaken with authorities, but also prepared themselves to be the agents of change, going beyond what was required by court settlements. But, while seeking new opportunities, they face questions:  why give these companies a second chance, given the magnitude of the crimes they were accused of? Is it worth preserving what they have in terms of knowledge, technologies and technical skills?

The answers lie in the examples of companies in other countries, which faced similar crises and knew how to renovate themselves. They started by recognizing their wrongful conduct, undertaking commitments, undergoing transformations and rebuilding the lost trust.  Also, they adopted a policy of zero tolerance towards wrongdoings. They challenged themselves to influence external environments, forging alliances to combat corruption and stimulating changes in public-private relations. And, by unconditionally adding ethics and integrity to capacity and competence, they resumed activities, growing once again, attracting talent and hiring people, resulting in development and permanent changes in public-private relations. And they became stronger than ever.

At a time when the country plans to resume investments and eliminate infrastructure bottlenecks in its determination to advance further in combating corruption, Brazilian engineering companies have taken up a cause: to comply and demand compliance with the commitments undertaken towards integrity. They underwent transformations and renovated themselves, preserving their capabilities and knowhow recognized inside and outside the country. It’s time to make choices. There are no robust economies without strong national companies in sectors that are the foundation of the economy, such as infrastructure.

Sergio Leão

Managing partner of Fronteira Sustentável Consultoria and sustainability consultant to Odebrecht S.A. He has a Ph.D. in environmental and sanitary engineering from the University of California.