PORTUGAL Trends and Developments Contributed by: Miguel Durham Agrellos, Paulo da Rocha Pichel, Ricardo Pereira Amaro and Francisco Duque Lima, Durham Agrellos
downturns, all of which align with the objectives of ESRS S1 (“Own Workforce”). Similarly, the environmental dimension can be linked to legacy preservation. A family whose identity is tied to an agricultural enterprise, for example, has a direct, SEW-driven interest in environmental stewardship to ensure the long-term viability of its core assets for future generations. In this context, compliance with environmental objectives such as the protection and restoration of biodiversity and ecosystems is not an external imposition but an action that reinforces the family’s core values and attachment to its enterprise. However, the SEW perspective can also reveal poten - tial governance deficits. The intense desire to maintain absolute family control and influence can foster insu - larity, opacity and resistance to external accountability mechanisms. This counterpoint of SEW can manifest as a reluctance to appoint independent directors to the board, an aversion to the transparency required by external audits (now mandatory for sustainability reporting under the CSRD), and governance structures that prioritise family interests over those of minority shareholders or other stakeholders. This phenomenon creates significant tension between the family’s inter - nal objectives and the good governance principles demanded by the external regulatory environment, and the paradox underscores the central challenge of ESG adoption for family businesses: leveraging the positive aspects of SEW (attachment to employees, good social relationships, exceptional care with the environment and its underlying assets, outstanding governance structures to maximise long-term value creation) while mitigating the potential for negative governance outcomes (the aforementioned govern - ance deficit, sometimes designated in sociology as amoral familism). Implementation: formalising an ethos Another critical impediment to ESG integration within family business is the dichotomy between their values and their codified corporate strategies. While a culture of stewardship may be pervasive, it often exists as an informal ethos rather than a structured, measurable and reportable set of practices. This gap is evidenced by empirical data, which has found that a vast majority of family businesses lack a formalised and communi -
cated ESG strategy. This deficit stems not necessarily from a rejection of sustainability principles, but from a combination of factors including a lack of institutional capacity, a cultural resistance to perceived bureau - cracy, and an underestimation of the strategic value of formal ESG compliance. The institutionalisation of ESG practices within the family business often requires a dedicated internal agent of change. The Family Office is uniquely posi - tioned to fulfil this role. As the professionalised entity managing the family’s financial and administrative affairs, the Family Office possesses the operational capacity and strategic perspective to bridge the gap between traditional family values and the techni - cal requirements of ESG reporting. It can act as an intermediary, translating the complex metrics of the ESRS into the language of legacy and long-term risk management that resonates with family stakeholders. Specific functions may include conducting a double materiality assessment to identify key reporting are - as, designing a data architecture for the data points required by the ESRS, implementing technological solutions to collect, manage and store all data points required by the ESRS, managing the mandatory third- party assurance process required by the CSRD or training family members (and employees of the family business) on their new duties related to sustainability. This formalisation process must result in a deliber - ate alignment of the family’s values and self-discipline instruments (family charters, shareholder agreements, trust deeds, etc). A family charter may state a com - mitment to responsible ownership, but this must be translated into the hard-law provisions of a share - holder agreement that governs share transfers and dividend policies in a sustainable manner. Thus, it is notorious that ESG requirements compel the family to move from implicit understandings to explicit commitments. The resulting dialogue facili - tates a strategic renewal that reframes ESG from an operational cost into a core component of the fam - ily long-term strategy: this institutionalisation of the business’ stewardship ethos is the critical step in transforming latent values into a demonstrable and defensible competitive advantage.
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