Carlos Alberto Roxo

Interview with Carlos Alberto Roxo and Luiz Fernando Brandão

Do intangible assets and values represent an important part of the value of your company? Which are your strategic intangible assets (human capital, brands, innovations, reputation...)?
Intangible assets affect directly the credibility and reputation of our company and they are therefore most valuable to us. There are many types of intangible assets. For customers and suppliers, our capacity for innovation in order to differentiate ourselves is very important. Even in traditional businesses, such as in the forestry sector, innovation and human resources are strategic assets that represent an important part of the value of our company.

Which perception and importance do your financial partners and stakeholders attach to your intangible assets? Which assets do they particularly use as a criterion for the valuation of your company?
There are different kinds of financial stakeholders. Traditionally, investors are more short-term oriented and therefore mainly interested in the quarterly results. However, long-term investors, who are our main shareholders, are increasingly looking at our intangible assets and sustainable results over time. We think it is a matter of time: a long-term vision combined with other factors that will lead to the highest long-term return. One of the key aspects is the vision that a company has of its role in modern society. Today, we live in a network society, which means a company should establish the best possible relationships with many different stakeholders in order to assure its long-term goals. The capacity to provide value to stakeholders and society on a sustainable basis involves the ability to adapt to a changing business environment without losing sight of your vision and mission.

How do you communicate on these intangible assets? By which back-ups (Annual Report, Road Show, shareholder dialogue, web...?) Does this essentially concern extra-financial information?
The communication in a network society takes place in many different and simultaneous ways. Of course, there are traditional ways of communicating on intangible assets through integrated reporting and the company website. This is one way of reporting and it is without a doubt important. But we believe that another way of communicating is through a consistent link between what a company talks and what it does. In other words, companies should walk the talk. And the talk cannot be restricted to the traditional communication channels, but on a one-to-one basis or in multistakeholder forums. It means we must communicate with stakeholders in different situations in different formats through discussions with them and with their active participation. This kind of communication is valued tremendously and highly contributes to the reputation of the company.

Is this communication sufficiently considered by the markets and your stakeholders? Is there an unfavourable “value gap” in this respect?
We are working on this. There are discussions with stakeholders and of course there are different views; the perception varies considerably, from strong support to substantial opposition. We respect the ones who have unfavourable perceptions on the way we do things, and try to engage with them and take their views into consideration. Trust plays a key role in this respect and building trust should be an essential objective of any company. It is more important to increase trust than it is to just increase investment in communications. A couple of years ago, I participated in a workshop in Miami where the following question was being debated: “what is more important for a company’s good communication over the long term?” A survey was shown where a number of executives pointed out that the highest priority was to increase investments in communication. I expressed a diverging view: the highest priority should be on building trust in order to increase the company’s credibility and allow it to better communicate its messages. Building trust is a must to effectively communicate sustainability value. If your credibility is low, it can be a waste of time to increase the amount of communication released.

You have been identified as a company with one step ahead concerning integrated reporting. Would you prefer a more marked general evolution towards an integrated reporting “One report”, which would aggregate financial and extra financial elements (sustainable development, intangibles...)?
Yes, this is the only way forward. As we have mentioned earlier, our financial stakeholders have different interests. However, in their long-term vision, they have the same concerns: prosperity for the future. Integrated reporting opens diverse perspectives, but has a common link in assessing the company. Integrated reporting is a comparative advantage, because it gives a more complete picture of the company and its business strategies. Integrated reporting also has internal advantages. It helps the company improve the quality of its management: a sustainability report can therefore be very valuable to everyone. However, the problem is that reports on non-financial issues tend not to be as transparent, clear and well controlled as financial statements. We need the same levels of disclosure and transparency for both. This is the challenge that we have to overcome in the future.

How would you analyse the advantages (better evaluation of competitiveness and global performance, simplification...) and the constraints (organisation, governance, control...) or risks of this method?
As discussed above, the advantages of integrated reporting are above all related to a company’s ability to make better decisions and to increase their level of transparency, as well as permitting investors and other stakeholders access to a wide gamut of information with which to assess the company’s strategies, processes and indicators. As to the constraints, firstly, there are no common levels of development and no tradition of integrated reporting. If some are well known and well established in many areas – for financial performance, for instance –, we do not have criteria on which to evaluate some factors such as the quality of relationships with stakeholders. There are many grey areas where criteria are subjective and could be interpreted differently in different parts of the world. Secondly, it takes generations for this “revolution” to happen completely, because we first need a cultural change in managers and shareholders to better understand the relevance of integrated reporting. However, the key challenge is not only integrated reporting in itself, but also the implementation of integrated reporting in the company’s management system.

Is an international frame of reference (“integrated reporting”) necessary? Should it be general or defined by sectors? What should be its source (soft law/recommendations on a voluntary basis, hard/law/norms)?
It is difficult to implement an international frame of reference. One should find specific indicators for specific sectors in order to standardize integrated reporting. But the problem lies at the international level, where the problem of subjectivity will persist.

Which tips would you give a company that wants to change its financial reporting to integrated reporting?
To know the company’s environment: Who are your stakeholders and what do they expect from your company?
To build sustainable relationships with all stakeholders: to consider the links between your company’s decisions and practices and your stakeholders’ expectations and needs, the different dimensions of your activities, to better understand the causes and effects.

To strive to communicate not only important indicators, but the measurable impact that these have or might have on external as well as internal stakeholders. Independent assessments and stakeholders’ views can contribute tremendously to this end.

To have buy-in at the highest levels of governance and to integrate the principles of integrated reporting within the company.

Biographie: Carlos Alberto Roxo is the General Manager of Sustainability and Corporate Relations of Fibria. After various jobs in institutions on Environmental Engineering, Roxo joined Fibria (then called Aracruz Celulose) in 1990. Roxo holds a degree from the Federal University of Rio de Janeiro as well as from the Water Quality Institute, Denmark. He is a member of the Shareholder’s Sustainability Committee of Veracel , Liaison Delegate to the World Business Council for Sustainable Development (WBCSD) and member of the Council’s Sustainable Forest Products Industry Working Group (SFPI WG) as well as co-leader of The Forests Dialogue (TFD).

Biographie: Luiz Fernando Brandão is a communicator, journalist and translator with extensive experience in corporate sustainability. After 14 years managing the corporate communication of Aracruz Celulose (today Fibria), he created the In Futuro consulting company. Prior to this, he worked as a business communicator companies such as Shell Brasil and the Rio de Janeiro Stock Exchange. He is a member of the Board of Counselors of the Brazilian Business Communications Association (Aberje) and the Communication Committee of the Brazilian Pulp and Paper Association (Bracelpa), where he represents his client Fibria.