The business of business
DEMAND AND SUPPLY - Boo Chanco (The Philippine Star) - December 16, 2019 - 12:00am

Times must really be changing. The Philippine Stock Exchange recently announced it is toughening the criteria they use for its Bell Awards. The awards recognize efforts of listed firms that follow good practices.

No longer will they just recognize the usual good corporate governance stuff that delivers more profits to shareholders. PSE now wants to also measure how listed firms care for the environment and its people.

The initials in vogue today is ESG for environmental, social and governance. Presumably, a profitable conglomerate will now have to show their coal power plants are not contributing to environmental damage.

In the same way, a highly profitable fast food chain or retail conglomerate must convincingly respond to claims that they hire many of their employees on an endo basis.

The PSE is saying it wants to recognize companies that help create a sustainable society. PSE is claiming it wants to steer all publicly listed companies toward creating a more sustainable capital market and, by extension, a more sustainable economy.

The PSE is working with the Securities and Exchange Commission (SEC) in aligning the Bell Awards with the SEC’s Sustainability Reporting guidelines. Starting next year, all publicly listed companies must accompany their annual financial reports with a report on how they have made their business operations sustainable.

According to SEC chairman Emilio B. Aquino, “the ESG factors are now material considerations alongside financial factors in the investment decision-making processes.”

There is still much that the SEC and PSE must thresh out to more clearly define sustainability. It is an overused word that probably means different things to different people.

But it is significant that business folks are even starting to talk sustainability at all. The business of a business is no longer defined by business as usual.

No longer must top management decide on the sole basis of its usual fiduciary responsibility to shareholders. There is the corporation’s responsibility to the larger society to remember as well. CSR as we know it is just a distraction.

The only PSE-listed company I can recall that has implemented environmentally sustainable programs in a big way that’s related to its operations is San Miguel. It is putting its money where its mouth is on environmental sustainability.

“We are very serious when it comes to sustainability. We have stopped our plastic bottled water business, even if it had been giving us good profits; we have taken on the challenge to reduce group-wide nonproduct water use by 50 percent by 2025, and we’ve poured more resources into major projects to clean up bodies of water, as well as into research that supports plastic waste reduction,” Ramon Ang, SMC’s top honcho said.

San Miguel has also announced it is set to become the first Filipino company to utilize fully certified biodegradable plastic packaging.

“Initially, we will use it for cement packaging. It is a biodegradable plastic woven packaging or sack, proudly developed by Filipino inventors, using local materials and made by local workers,” Ang said.

In addition to using biodegradable cement bags, the company’s cement business also currently buys plastic water bottles and bags, for use as fuels for its cement plants. It also uses discarded rubber tires and industrial sewage waste as secondary fuel for its cement plants.

This is part of San Miguel’s sustainable business models, which include the zero-waste returnable glass bottle system, and manufacturing processes following circular economy principles—where by-products are reused to create other products.

San Miguel has also started using hard-to-recycle plastics as an alternative raw material for road surfacing. This will reduce the volume of scrap plastics that end up in the landfills. The Philippines’ first recycled plastics road was initially tried by San Miguel Corp. in General Trias, Cavite.

San Miguel used over 180,000 sachets and plastic bags with asphalt on a 1,500-square meter pilot test site. The plastic waste acts as a binder for the production of asphalt and can help make roads more durable, the company’s technology partner Dow explained.

San Miguel said independent lab testing done on its recycled plastics road asphalt showed that it exceeded the standards of the DPWH. San Miguel hopes to build plastic roads in its facilities, as well as infrastructure projects in the future.

I don’t know if I am giving PSE more credit than it deserves on their sustainability initiative for the Bell Awards. Maybe the PSE is thinking sustainability is a survival necessity in today’s business environment. We can no longer ignore the social consequences of a company’s operations.

San Miguel’s initiatives show sustainability can be done as part of its business plan without sacrificing the bottom line. It is a whole new ball game.

Corporations cannot throw peanuts in so called CSR projects and think that’s enough to be seen as socially responsible and therefore, sustainable. San Miguel is showing sustainability must be part of the corporate business strategy.

To be sustainable and socially responsible means the corporate footprint does no damage to lives of people in the communities where they are.

A mall developer must make sure its mall will cause no massive traffic jams in its vicinity, kill small businesses and put pressure on the natural environment.

A property developer that takes on the responsibility of a city planner must make sure there is adequate public open space and good vehicular and pedestrian traffic flow.

Manufacturers must link their supply chains with local suppliers. Those in the food business can link with farmers, providing a ready market for produce without the middlemen.

The business of business can no longer be defined in the narrow terms of old. Everyone is now in the business of building society. Businesses must now operate on the basis of the triple bottom line (TBL), often referred to as the three P’s: people, planet, and profit.

I am sure there are other local companies as serious as San Miguel is in fostering sustainability. The future awardees of PSE’s Bell Awards should show us more.

Boo Chanco’s e-mail address is bchanco@gmail.com. Follow him on Twitter @boochanco

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