Professor Ligia Costa, FGV-EAESP, Director of the FGV Center for Ethics, Transparency, Integrity and Compliance Studies, explores the argument for adopting ESG concepts to turnaround human rights issues in the Brazilian wine sector despite the presence of existing codes of ethics
ESG and the Wine Sector: Why do Viniculture Grapes Turn Sour? By Professor Ligia Maura Costa. Originally published in Portuguese in the journal Jota. With kind acknowledgements to Professor Adrian Zicari, ESSEC Business School.
There was a recent discovery of a subcontractor from Vinícola Aurora, Cooperativa Garibaldi and Salton using labour analogous to slavery in the production of grapes, and apparently without their knowledge.
In Bento Gonçalves, a Rio Grande do Sul city with just over one hundred thousand inhabitants, workers were kept in private prison, in inhuman and degrading conditions, with no access to drinking water, bathrooms or rest, and were forced to work more than 15 hours a day, seven days a week, without the right to a minimum wage or even a formal labour and not even a formal work contract.
Are we facing yet another chapter in the history of human rights violations in Brazil? The 2030 Agenda, adopted by the UN in 2015, encourages governments and companies to adopt concrete measures to combat slave labour, in all its forms. How can wineries regain legitimacy after a human right scandal? Beyond the grapes, bitter with the sweat of labour analogous to slavery, and the hiring of the same subcontractor by the three wineries, what else do they have in common?
ESG: Sweet and sour, wine and wrath
The role of companies today is more complex than in the past. A strong sense of corporate social responsibility is expected in order to respond to the legitimate expectations of society. The social responsibility of wineries goes beyond the production of goods and the generation of profits for shareholders, on the model of the management primer of former CEO Jack Welch. Good working conditions and remuneration are decisive factors in characterising a “good company to work for”. The acronym ESG, in vogue in the business world, for the abbreviation in English of environmental, social and governance (ESG), seems that for the three wineries nothing more than a “good alphabet soup to have on the wall”. The ‘S’ in ESG stands for social aspects, including labour and human rights, as well as the company’s relationship with stakeholders and the communities in which it carries out its activities.
All three wineries have social responsibility codes of conduct available on their respective websites and condemn forced labour or conditions analogous to slavery. The Code of Ethics and Conduct of Vinícola Aurora states that “Inhuman and inhumane and degrading working conditions are not accepted in any way.”
The understanding of the Garibaldi’s Culture Code: “Health, welfare and safety must always be taken into consideration in all personal interactions and decisions taken, not tolerated by any of the stakeholders of the cooperative, any practices that exploit forced, compulsory, child labour or promote human trafficking are not tolerated by any of the cooperative’s stakeholders. Salton, one of the wineries signed in 2022 to the UN Global Compact Brazil Network, a commendable initiative of the United Nations to mobilize the business community to adopt and promote best business practices.
A gap between talking and walking the ESG talk
Why have wineries not respected the ESG conduct criteria set forth in their own codes of conduct? What led them to forget these criteria? Why did hiring the same outsourcer go against the provisions of their respective codes of conduct? Does the disregard for social and corporate governance aspects constitute a risk that should be accepted for the sake of increasing profitability? What is the common pattern among these wineries that led them to produce such bitter grapes? The answer is simple: failure in corporate governance and disrespect for human and social rights, the letters “G” and “S” of ESG.
Evidence seems to show that there is a wide gap between what wineries claim in their social responsibility codes of conduct and their actual day-to-day business behaviour. After the scandal of the third-party supplier using slave labour and which exposed Vinícola Aurora, Cooperativa Garibaldi and Salton, what is the legitimacy of the of their codes of conduct? What is the credibility of their statements to the society? How much trust should consumers have in the advertising of their products?
The 2030 Agenda includes a set of 17 Sustainable Development Goals (SDGs), which encourage companies to make commitments to eradicate slave labour and other forms of forced labour by 2030. In particular, SDG 8 – Decent Work and Economic Growth – states in target 8.7. that companies should: “Take immediate and effective measures to eradicate forced labour, end modern slavery and trafficking of people […]”. On the other hand, SDG 12 – Sustainable Consumption and Production says in target 12.6 that it is “Encourage companies, especially large and transnational companies, to adopt sustainable practices and to integrate sustainability information into their reporting cycle”.
It is clear that companies are responsible for their suppliers to implement sustainable practices are implemented in all aspects along the production chain. Respect for fundamental human rights is an essential part of sustainable and inclusive economic development. The Salton Family, in “Thriving Relationships”, reports that to be proactive in the development of our employees and communities, engage our supplier communities, engage our suppliers in the ESG agenda and encourage responsible consumption. ” However, rather than highlighting in their social responsibility codes of conduct what they will do by 2030, as in the film Back to the Future, wineries should concentrate on what they are doing today and focus on the concrete and immediate response to the serious problem they face.
Integration of ESG in the wine sector will lead to behavioural change
Wineries must adopt a new organizational structure, modern risk mapping procedures, monitoring and control, review of deviant norms, improvements in corporate governance, and, in case of proven serious violation, immediately remove the culprits, whoever they may be. An integration of ESG concepts into the day-to-day governance processes of wineries will lead to behavioural changes in these organisations. In addition, they must cooperate with the authorities to resolve the situation as quickly as possible, pay fair compensation to workers, and create a fund that guarantees the payment of back wages, as well as all the benefits provided by law.
The application of Article 243 of the Brazilian Federal Constitution, which provides for the expropriation of land in cases of slave labour in favour of agrarian reform, is a measure of justice, in case the wineries are repeat offenders of human rights violations. Over several years, the Fazenda Brasil Verde in Marabá and the Fazenda Santa Brígida in Uruará, both in Pará have been the target of various labour inspections, revealing the recurring practice of labour analogous to slavery. The two farms were expropriated, as provided in the Federal Constitution. Let us hope that this does not happen with the wineries and that they have learned their lesson. Now, if this is not the case, let the law be applied, because the law is for everyone.
Society has a responsibility to demand that wineries value human dignity above profit and dignity above profit and to reject any and all practices involving forced labour or conditions analogous to slavery.
Useful links:
- Read a related article: In Vino Veritas: sustainability in the wine industry
- Link up with Prof. Costa on LinkedIn and learn more about her on Wikipedia
- Follow Prof. Ligia Maura Costa on Twitter
- Discover the FGV Center for Ethics, Transparency, Integrity and Compliance Studies
- Study a post-graduate degree at FGV-EAESP, Sao Paulo, Brazil.
Learn more about the Council on Business & Society
The Council on Business & Society (The CoBS), visionary in its conception and purpose, was created in 2011, and is dedicated to promoting responsible leadership and tackling issues at the crossroads of business and society including sustainability, diversity, ethical leadership and the place responsible business has to play in contributing to the common good.
Member schools are all “Triple Crown” accredited AACSB, EQUIS and AMBA and leaders in their respective countries.
- ESSEC Business School, France-Singapore-Morocco
- FGV-EAESP, Brazil
- School of Management Fudan University, China
- IE Business School, Spain
- Keio Business School, Japan
- Smith School of Business, Canada
- Stellenbosch Business School, South Africa
- Trinity Business School, Trinity College Dublin, Ireland
- Warwick Business School, United Kingdom.
