**3.2 Native organic food**

Sugar and ethanol are part of Brazilian history. Sugar is the first exportable product since colonial times, and the oil crisis of 1970s created conditions that led to the implementation of the largest renewable fuel project, the National Alcohol Fuel Program, known as Proálcool. The investment of substantial amounts of resources, in both agriculture and industry increased the country's production capacity and became the world's largest producer and exporter of sugar and ethanol [28].

Native is an organic food company, part of the Balbo Organization (1946), which comprises six companies that produce sugar, alcohol, biodegradable plastic, electricity, animal feed and carbon certificates. The Native brand was launched in 2000 for organic sugar and today is a reference for the organic market, operating in more than 70 countries, being the world's largest producer of organic sugar and alcohol.

The Balbo Group company was founded in 1946, with the establishment of the Usina Santo Antonio (Santo Antonio Mill), in countryside of Sao Paulo. Today, the group operates three units: São Francisco (SP), Santana (SP) and Uberaba (MG), in 37.800 hectares, producing 7,2 million tons of cane, generating 315 thousand tons of sugar and 405 thousand cubic meters of ethanol. The plants are self-sufficient in energy, which is obtained from burning sugarcane bagasse. The co-generation of thermal, mechanic and electric energy is under the responsibility of Bioenergia, another company from Balbo Group, which supplies the proper energy needs and generates surpluses to grid, since 1987. The surplus energy traded is equivalent to the consumption of a city with 500,000 habitants.

In 2000, they became partner in the creation of Biocycle, a new company dedicated to the increase, consolidation and development of technology, production and commercialization of Polyhydroxybutyrate (PHB), the biodegradable plastic originating from sugar cane.

The case study refers to Native brand (Sao Francisco Mill) and does not involve the other companies in the group. The family has been in the sugar business since 1903 and is recognized as traditional industry group with entrepreneurial and innovative profile. But the great milestone to the group, was the research project that revolutionized the production system of sugarcane, broke the paradigms of the sugar and ethanol sector and gave rise to Native.

The Native project changed the traditional process of sugarcane cultivation without the intensive use of fertilizers and agricultural pesticides, eliminated the fires, and so, implemented the organic cultivation. An important aspect was the transformation of sugar, a commodity product sold in bulk, to be marketed and exported as a premium packed product: organic sugar. According to Carvalho, Native is an emblematic and unique case study [29].

This change was led by Leontino Balbo Junior, agronomist that joined the family business in 1986. He soon realized that the harvesting method often used, which depended on burning sugarcane straw before harvest, was incompatible with the modern tropical farming techniques he had just studied. In the search for new methods of agricultural production, he developed a new technique inspired by the natural methods of plant and animal production and named it as Ecosystem Revitalizing Agriculture (ERA). The research project was launched as Green Sugarcane Project, required an initial investment of US\$25 million and it took almost ten years to convert plant to organic agriculture and become a business alternative for the company [29, 30].

The project involved collaboration of important research institutions such as Embrapa, Satellite Monitoring and the Technological Research Institute (IPT-USP), plus the collaboration with the State of Sao Paulo universities such as USP, UNESP and UNICAMP [29].

The purpose of the project was to maximize the potential of sugarcane cultivation by restoring fields to their natural state. Seven major changes in the production system were implemented: (1) elimination of the sugarcane burning; (2) the adoption of the biological control to avoid harmful insects; (3) the implementation of forest biological islands; (4) the elimination of agrochemical products consumption; (5) the rational utilization of agro-industrial waste as fertilizer; (6) the development of a system for the integrity of the soil; (7) and the adoption of green manure practices in the rotational crops.

The project brought benefits to the company and stakeholders. Workers achieved good working conditions and kept their jobs, even with the mechanization of the harvest. The local community were benefited by reducing the negative impacts of traditional sugarcane production, generating income, jobs and improving quality of life. Among the environmental benefits were the improvement of volume and quality of water resources; the reduction of erosion of productive land; the reduction of greenhouse effect gases; and the increase of biodiversity in the areas of native vegetation.

Since 2002 researchers of several institutions under the coordination of the Embrapa Satellite Monitoring, have studied the fauna inventory and found significant results: over 330 species of mammals, birds, reptiles and amphibians have been identified in the surroundings of the production areas; several new species were observed; 49 of the species discovered were endangered. These results are 23 times greater than the biodiversity found in conventional sugarcane plantations in the same region [29].

The Sao Francisco Mill produces ethanol, a biofuel that reduces the GEE emissions, which means a contribution to climate change combat. Furthermore, the new way of producing also reduces GHG emissions. The greenhouse gasses emissions were inventoried between 2006 and 2007. It was based on GHG protocol,

#### *Corporate Social Responsibility and Sustainability in Corporate Strategy: Brazilian Cases Studies DOI: http://dx.doi.org/10.5772/intechopen.94414*

considering the analysis of life cycle, from sugarcane farming, industrial phase of sugar and alcohol production, up to the transport, marketing and consumptions of products, both domestically and abroad. The emissions value found were lower than the average emissions normally found in the sugarcane business, due to the organic production methods [31].

The electricity cogeneration system, from the combustion of sugarcane bagasse (fuel from biomass) is neutral in the emission of greenhouse gases. In 2020, Sao Francisco Mill has just been recognized as a producer of biofuels with the Renovabio certification - granted by the National Petroleum Agency (ANP). The certification recognizes that the plant contributes to the mitigation of Greenhouse Gases (GHG) and can receive 55,655 Decarbonization Credits (CBIOs) for sale on the stock exchange for 3 years, from the date of issue of the certificate.

During the evaluation process, the producer receives a score inversely proportional to the carbon intensity of the biofuel produced (Energy-Environmental Efficiency Score). Among all 220 certified plants that produce ethanol from sugar cane, this specific received the highest energy efficiency score (71.6). In addition to the score, the certification process for the production of biofuels takes into account the origin of the energy biomass as raw material for biofuel.

The impact on business was significant. The Balbo's group farms achieved yields 20% higher than the average of farms in their region, had cost savings when avoiding the purchase of chemical fertilizers and pesticides, and recycling the residues from his own farm. Undoubtedly, this process provided strategic advantages for the company, besides the development itself of the organic products market.

In 1995, the company was consulted by North American Global Organics that was looking for organic sugar suppliers in Brazil. After initial contacts, representatives of Global Organics indicated that the production process developed by the Green Sugarcane Project was close to the one required to obtain the certificate of organic production demanded by them. The possibility of accessing the European and North American markets, both with raw and with processed sugar, encouraged the company to bet on organic production and seek certifications seals. The Native brand, launched in 1998, was the basis for the first product line whose main customers are the food industries of USA and Europe which resale the packaged product with their own brands [32].

The certification seals are very important for the organic sector, gives reliability to an organic product, ensures that is produced according to standards of management and quality required worldwide for the organic products. It is only granted for production processes that do not use any chemical pesticides, industrial mineral fertilizers or genetic modified organisms. Furthermore, these processes should promote ecological balance in cultivated fields, and company should have positive social and economic impact on the community it serves.

The first organic certification obtained was from the Farm Verified Organic (FVO) program, a private North American standard recognized by International Federation of Organic Agriculture Movements (IFOAM.) Due to the demand of a European customer, the Ecocert was also obtained. Over three decades it has obtained national, international certifications and labels, between organic, socioenvironmental, fair trade and product quality, as shown in **Figure 2**.

In 2006, demanded by Natura, a new opportunity arose to develop organic vegetal alcohol. Then Native gathered new customers and markets, especially for food, cosmetics and pharmaceutical industries, to use in the composition of drugs as to the production of deodorants and colognes, where it was not used until there. The production of alcohol began in 6,7 thousand tons (2007) and came to 14,2 thousand in 2018, and 9,9 thousand in 2019.

**Figure 2.** *Native certification timeline.*

Native has become an organic food company, managing a production chain, with raw material suppliers, processors operating in various regions of Brazil and even abroad. In addition to organic sugar, it has developed several organic products, such as coffee, fruit juices, cocoa mix, breakfast cereals. It has a portfolio of 80 products, marketed in Brazil by the retail chain over 8 thousand points of sale. The internal market accounts for 30% of the company's revenues. It is present in more than 70 countries, the main ones are the United States, Canada, in all countries of Europe, Japan, China, South Korea, Australia, New Zealand, Chile, Peru, Argentina, Bolivia, Colombia, South Africa, Saudi Arabia, Israel. It has become the world's largest producer of organic sugar and alcohol.

Finally, there is a favorable scenario for organic production. Studies have shown that the production and consumption of organic products in the world has grown significantly, driven by the expansion of demand for organic food and beverages in the countries of Europe and North America, in addition to China. International demand for organic products tends to rise steadily over the next few years (since 2000 the average annual growth has being 11%), as these products have been progressively associated with higher levels of safety and health for consumers and lower social and environmental impacts [33]. In Brazil, despite the fact that consumer market is considered the largest in Latin America, production and consumption of organic products also increased, but at a slower rhythm, concentrated in middle class that require healthier foods [33]. **Table 3** shows the participation of all organic products in total revenue by 70% due to minor conversion of ethanol yet [34].

#### **3.3 BSBIOS biodiesel**

In mid-2004, Erasmo Batistela was waiting in a bank line when some farmers asked his opinion about biodiesel. He owned two gas stations in Colorado (Rio Grande do Sul) and knew little about the subject. He decided to research on the subject and after conducting a financial study with advice from Brasil Bank and specialized consulting, decided to invest in the area and founded BSBIOS in 2005. Due to logistical issues he chose the city of Passo Fundo (RS) and the City Hall provided the area to install the industry. In 2009 he acquired the Marialva (PR) unit and in 2011 Petrobras entered as partnership (50% of shares) [35].

The company's current corporate structure is the result of a Joint Venture between RP BIO and Petrobras Biocombustivel. RP BIO belongs to the ECB GROUP, *Corporate Social Responsibility and Sustainability in Corporate Strategy: Brazilian Cases Studies DOI: http://dx.doi.org/10.5772/intechopen.94414*


#### **Table 3.**

*Product participation in revenue and EBITDA.*

captained by Erasmo Batistela which operates in the field of renewable energies and advanced biofuels. Petrobras Biocombustível is a wholly owned subsidiary of Petróleo Brasileiro S.A. - Petrobras.

#### *3.3.1 Biofuels sector in Brazil*

In Brazil, the production of biodiesel was supported by National Program for Production and Use of Biodiesel – PNPB, launched in December 2004 with the purpose of add the biodiesel into the Brazilian energy matrix. In 2008, the mixing of pure biodiesel to diesel oil became mandatory. The initial mixing of 2% was gradually increased to 3% (2009), 4%, 6%, 7%, 8% (2017), 10% (2018), and will reach 15% in 2023. With the focus on social inclusion and regional development, the main result of the first stage was definition of a regulatory framework. One of the milestones was the creation of the Social Fuel Seal by the Ministry of Agricultural Development – MDA, a certification granted to biodiesel producers who acquire percentages according to the raw material region from familiar agriculturists classified in the National Program Strengthening of Family Agriculture – PRONAF.

The seal promotes the transfer of income to family farming, regional development and increased agricultural productivity. Industries benefit from federal tax exemption, access to better financing conditions and reputation gains. Farmer's family receive a bonus and technical assistance from the producers. This policy benefits all community, government, industry and society, distributing wealth, bringing training to the field, adding new tools and technologies that contribute to the maintenance of young people in the field, paying attention to environmental issues. BSBIOS wholesomely promotes this policy by acquiring the necessary raw material directly from farming family cooperatives.

In 2016 it was launched the national biofuel policy - RENOVABIO, established by Law no 13.576/2017, based on predictability, environmental, economic and social sustainability, compatible with market growth. It introduced a new strategic view to the sector, improving economic mechanisms that allowed the organization of a decarbonization credits market. It assigns carbon intensity ratings to individual producers, in which such decarbonization credits (CBIO) can be freely negotiated. The RenovaBio program represents a major step toward implementing Brazil's

#### *Corporate Social Responsibility*

commitment at COP 21 in Paris, putting in place the right set of measures to scale sustainable fuels and promote low carbon solutions for the transport sector.

Currently there are 51 biodiesel producing plants authorized by the National Agency of Petroleum, Natural Gas and Biofuels (ANP) for operation in the country, corresponding to a total authorized capacity of 25.9 million liters/day. The national production that started in 2005 with a volume close to 700 thousand liters, reaches 5.90 billion liters in 2019.

The definition of a legal and regulatory framework was fundamental to attract private investments in the biodiesel sector in Brazil. As a renewable fuel, biodiesel contributes to the reduction of carbon dioxide emissions into the atmosphere and the deceleration of global warming. From the economic point of view, in turn, the enormous potential for generating employment and income is highlighted, in addition to the positive contribution to the Brazilian trade balance by reducing imports of diesel.

BSBIOS is recognized for the quality of the services it provides, for supporting innovation, for socio-environmental engagement, as well as for regional development. It operates primarily in the production and distribution of biofuels, but also in the market for the sale of soybean meal, glycerin and sludge. It is the largest producer of Biodiesel in the country and operates in 14 Brazilian states, especially in Rio Grande do Sul and Paraná, as well as in six countries, with a strong participation in the production and distribution of biodiesel. BSBIOS produced in 2019, 604,827 m3 of biofuel, achieving the highest volume of biodiesel delivered, with a market share of 10.28% and a consolidated profit [36].

#### *3.3.2 Supply chain*

The production of Biodiesel is related to the transformation of soybean into soybean meal and soybean oil. Since 2007 BSBios holds the Social Fuel Seal, where over 40% per year of the raw materials used in the production of biodiesel is acquired from family farming. The purchase of the product is made by family cooperatives, located in the south and northeast of the country, which have at least 50% of family farmers in their membership (family cooperatives) or are qualified as agricultural cooperatives that supply raw materials to biodiesel farmers.

In 2019, BSBIOS acquired 4,425,608 ton of grain soybeans and 4014 ton of soybean oil, 7403 ton of corn and 5000 ton of coconut oil from family farming organized in 24 cooperatives. The company has a portfolio of more than 226 suppliers, operating daily in the available soybean market, seeking to supply the demand of 3200 tons per day.

It also has a program and policy for receiving soybeans in order to mitigate the market storage deficit, receiving soybeans and crushing them during all 12 months of the year. BSBIOS offers to its suppliers the possibility to make exchange contracts for its products such as soy meal, soy husk and soy residue, adding value to the business and contributing to the production chain of region.

Animal fats have been standing out in the production of biodiesel, not only in environmental aspects, but also because it is an important supply alternative. It is a sustainable economic alternative for both the supplier and the company. Animal fat consumed in the BSBIOS production process is certified by Renovabio, being the main component for the emission of CBios. The use of animal fat from BSBIOS has been growing annually. The use started in 2011, at the Marialva unit and, in Passo Fundo, in 2015. In 2019, it represented 26.7% of its production in Passo Fundo, and 42.43% in Marialva.

The activities for the production of Biodiesel are so integrated that a product becomes input to another, generating a mutual benefits cycle on the entire chain and adding value.

In 2018 and 2019 the GHG emissions inventory of Passo Fundo and Marialva units was carried out, following the GHG Protocol. Among the positive factors for GHG emissions, it was the use of modal transport in the unit of Passo Fundo, biomass in the boiler and the purchase of renewable electricity.
