Banco Real-Bnaking on Sustainibility

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Business Landscape: In 2005, Brazil’s economy is finally showing signs of recovery from inflation rates that were out of control, decreases in real growth, and a general lack of political direction which had plagued the nation for several decades. Taking office in 2003, President Lula immediately started making changes. With the reduction in foreign debt and government spending as his two initial goals, Brazil’s GDP experienced a marked improvement in 2004, growing by 5.2%. Although this was an encouraging sign of improvement, the Brazilian economy had been in peril for nearly 20 years; this would prove to be the first step of a long journey. Looking forward, the nation will need to focus on developing infrastructure (transportation, waste management, etc…) which is in direct conflict with one of Lula’s initial goals. Analyze the firm: Banco Real (BR) was founded in 1925, and was acquired by ABN AMRO in 1998. Its operations are along three business lines including Consumer and Commercial Clients (CCC), Wholesale Client Service (WCS) and Private Clients (PC) .CC focused on activities like retail, consumer credit and commercial bank, customer service and small and medium sized companies, WCS was responsible for servicing large corporations, and PC was responsible for management of personal and family assets. Organizational structure was a mix of functional as well as business hierarchy. After the acquisition in year 1998, there was initial concern about a cultural merger, however, since ABN AMRO had some core values as part of the integration process, BR needed to distinguish itself from the competition. Fabio Barbosa (FB), Jose Luiz Majolo (JLM), and Maria Luiza Pinto (MLP), the three leaders of BR, decided to bring new face to company’s business model by focusing on “value creation” (Exhibit 1). In this way, not only can BR offer additional value to customers, employees, and society, it can do so while differentiating itself from the competition by bringing ethics and social values in the business model.

The process of reinventing itself started with self evaluation based on parameters set by the Ethos institute, followed by participating in seminars, which were organized by Friends of Earth, NGOs etc. BR leadership also read socio-environmental evaluation reports of its competition. This paved the way for BR to establish its foundation of sustainability in the effort to distinguish itself from the competition. Being aware that these initiatives have to be implemented internally by company first, there were some initial challenges company had to deal with. Two events occurred to further their efforts; one in which a notorious alley just next to company was changed into a garden, and the other when BR sent the message to the outside world that it would be socially responsible in the aftermath of the Bond after Death incident. In continuation of fostering the sustainability efforts, a new functional group was formed under the leadership of MLP in 2001. Its main purpose was to embed this culture inside the bank’s operations as well. Additionally, a customer focus strategy was launched in an effort to strengthen sustainability efforts. Its successful implementation was evident in May 2003 when FB met with a disgruntled customer to listen to her and resolve her concerns.

On the business side as well there were some changes like a) introducing the micro-finance model, in which small loans were given to very poor people, in order to stimulate economic and social growth. b) launching the 3R’s and Diversity Campaign (discussed later in Key Change Drivers) and c) launching an ethical mutual fund in 2005.

The growth of BR indicated that the effort to distinguish itself from the competition was paying off. By 2004, compared to other Brazilian banks, BR ranked top 6 in total assets (Exhibit 2), 5th in Net Assets (Exhibit 3) and 3rd in terms of return on investments (Exhibit 4). Additionally, BR...
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