New protocol will restrict access by slaughterhouses and slaughterhouses to credit lines

The Brazilian Federation of Banks (Febraban) launched this Tuesday (30) a new protocol to associated institutions to prevent the granting of credit to slaughterhouses and slaughterhouses that cannot prove the origin of slaughter cattle from areas without deforestation in the Amazon and Maranão.

The protocol is a kind of self-regulation for the beef chain and will be valid for direct and indirect suppliers, and already has 21 confirmed banks. Among the institutions are the largest in the country such as Itaú Unibanco, Banco do Brasil, Bradesco, Santander and Caixa Econômica Federal.

According to Febraban, banks that have adhered to self-regulation will have to require customers to implement a traceability and monitoring system to access credit lines. The deadline for adopting the measure is a year and a half (until the end of 2025).

Isaac Sidney, president of the entity, explains that banks are at the “epicenter of the country’s production chains”, and that they need to “stimulate actions to develop an increasingly healthy economy”.

“The sector is aware of the need to advance in the management and mitigation of social, environmental and climate risks in business with its customers and channel more and more resources to finance the transition to the Green Economy”, he said.

The federation’s decision to implement the protocol comes at a time when several countries around the world – especially in Europe – are discussing measures to restrict trade in products from areas of illegal deforestation.

This system should include information such as embargoes, overlaps with protected areas, identification of deforestation polygons and authorizations for suppression of vegetation, in addition to the Rural Environmental Registry (CAR) of the properties where the animals come from. Social aspects, such as checking the records of employers who have subjected workers to conditions analogous to slavery, were also considered.

Self-regulation policy exists with other parameters since 2014

The new self-regulation protocol already exists at Febraban since 2014 with other socio-environmental policy initiatives, which are now more restricted. Amaury Oliva, sustainability director at the entity, says that the standards were discussed with the production chain over the last few months, seeking to consolidate criteria aligned with good socio-environmental practices already promoted by market initiatives.

“We know that there are a series of obstacles 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, accurate and comprehensive databases, as well as the ability of small livestock farmers, for example, to adapt. For this reason, we started with the direct suppliers of slaughterhouses and the first level of indirect ones, which already demonstrates progress, and we defined some alternative mechanisms, for example for small slaughterhouses”, he says.

The entity’s self-regulation council is composed of sixteen members, eight of them representing the Signatory Financial Institutions (“Sectoral Councilors”) and eight representing civil society (“Independent Councilors”).

According to Febraban, the current rule deals with responsibility policies and the management of social, environmental and climate risks of the institutions and includes, among others, socio-environmental criteria for granting rural credit that go beyond the rules established by the Central Bank of Brazil. The last version of the document was revised in 2020 and is now undergoing a new update, to be completed in 2023.

Banks that adhere to self-regulation undertake, on a voluntary basis, to follow the standards of the rule of conduct and are periodically supervised, and may suffer punishment in case of non-compliance. Among the punishments, there are administrative procedures that may include the signing of an action plan/conduct adjustment; the payment of fine; the suspension of participation in the Banking Self-Regulation System, the suspension of the use of the Self-Regulation Seal and the suspension of the term of office of its Board Member on the Self-Regulation Board; and the exclusion of its participation in the Banking Self-Regulation System.