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30/05/2023

Banks establish self-regulatory rule for bovine meat chain

The new normative establishes partnership and common protocol for the management of the risk of illegal deforestation in credit operations with meat packers


Brazilian banks, when offering credit to meat packing plants and slaughterhouses, shall have to comply with a protocol with common minimum requirements to combat illegal deforestation. The decision is part of the new standard approved by Febraban Self-Regulatory Board, and of several actions already taken by the financial system in the field of sustainability.

The new rule, approved in March, determines that banks which are signatories to the Self-Regulation shall request their meat packing plant customers, when located in the Legal Amazon and in Maranhão, to implement a traceability and monitoring system that allows demonstrating, by December 2025, the non-acquisition of cattle associated with the illegal deforestation of direct and indirect suppliers.

The system shall include information such as embargoes, overlaps with protected areas, identification of deforestation polygons and authorizations for the suppression of vegetation, in addition to the Rural Environmental Registry (Cadastro Ambiental Rural - CAR, in Portuguese) of those properties from where animals or groups of animals originated. Social aspects, such as the verification of the registration of employers who have submitted workers to slave-like conditions, were also considered.

To promote the adoption of the proposed practices, financial institutions shall define the appropriate adaptation plans, incentives and consequences. And in order for the progress of the meat packing plants to be monitored over time, performance indicators have been established, to be periodically disclosed by the meat packing plants.

“Banks are at the epicenter of the country's production chains and will stimulate actions to develop an increasingly sustainable economy,” says Isaac Sidney, president of Febraban, who adds: “The sector is aware that it is necessary to advance in the management and mitigation of the social, environmental and climate risks in businesses with its customers and to channel more and more resources to finance the transition to the Green Economy.”

According to the sustainability officer of Febraban, Amaury Oliva, over the last few months, the entity has dialogued with representatives of industry and civil society and sought to consolidate criteria aligned with good socio-environmental practices already promoted by market initiatives. “This mobilization of the banking sector is aligned with the best practices adopted by meat chain actors, either individually or by means of multistakeholder initiatives, which involve parties such as meat packers, supermarkets, technology companies, and NGOs", says Oliva.

The objective is to strengthen the impact of these actions by engaging financial institutions through sectoral self-regulation. From the banks' perspective, financing activities associated with deforestation can increase credit, reputational and operational risks.

“We know there are a number of barriers for traceability to reach the entire cycle, especially producers in the early stages of the supply chain. These challenges include the existence of up-to-date and comprehensive databases, in addition to the ability of small cattle farmer, for example, to adapt. Therefore, we started with the direct suppliers of the meat packing plants as well as the first level of the indirect ones, which already shows progress, and we defined some alternative mechanisms, for example for small meat packing plants”, concludes Oliva.

The regulation announced is complementary to other initiatives on the subject led by the Federation which, since 2014, has a socio-environmental pillar in its self-regulation.

The regulation currently in force addresses the accountability policies and management of social, environmental and climate risks of the institutions and it includes, among others, socio-environmental criteria for the granting of rural credit that go beyond the rules established by the Central Bank of Brazil. criteria for the granting of rural credit that go beyond the rules established by the Central Bank of Brazil.

Banks that voluntarily adhere to the Self-Regulation, commit to follow even higher standards of conduct, are periodically supervised and may suffer penalties in case of non-compliance.

 

Febraban – Brazilian Federation of Banks
Board of Communication
imprensa@febraban.org.br

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