A "new philosophy" may limit the kind of businesses Ayala Corp. will go into in the future, top executives yesterday said as they vowed to pursue a "triple bottom line" of economic, social, and environmental performance.
But Ayala is not entirely closed to diversifying into industries with a poor environmental track record such as mining and power, its chairman Jaime Augusto Zobel de Ayala told journalists, as there's a "better way" of harnessing natural resources for public benefit.
Ayala released its first "sustainability" report yesterday -- the first conglomerate in the country to do so -- in what will be a biennial exercise of measuring the group’s impact on the community and the environment to encourage "good corporate behavior" among its business units.
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| The Ayala Board (www.ayala.com.ph) |
The Zobels believe the strategy will raise the public image and further ensure the longevity of Ayala Corp., which at 175 years is the Philippines’ oldest business powerhouse engaged in real estate, banking, telecommunications, water, electronics, and car distribution.
Jaime Augusto said consumers were beginning to demand good behavior from corporations and that there were "pockets of money" in the global markets interested in investing in "responsible" firms.
But he and brother Fernando, Ayala Corp. president, said this should not necessarily sacrifice profitability. In the future, good practices should also translate to higher share prices.
"[This] new philosophy about doing business should hopefully not take away from efficiency, profitability, and intelligent use of risk capital and getting a good return on it.
"They’re not mutually incompatible. Because you are a responsible business entity doesn’t mean you are a disaster from the financial point of view," Jaime Augusto said.
To make this sustainable, the group will integrate "corporate social responsibility" projects into the overall business model and as much as possible create new businesses out of them, not just engage in philanthropy, Fernando said.
For instance, the Ayala-led Manila Water Co. -- the first Philippine-based firm to issue a sustainability report in 2004 -- has reduced leaks and at the same time created a business out of a project to supply water to poor barangays. It has also been farming out contracts such as for painting and making street signs to surrounding communities to create "goodwill."
"What it has done for the community to protect the water system and to love the company is many, many times bigger than the little extra headache," Fernando said.
Another example is a micro-finance tieup between Bank of the Philippine Islands and Globe Telecom, Inc., providing banking services to the "unbanked" using mobile phones.
Some 250 Ayala executives will meet in Makati next week for a "sustainability summit" to set the group’s directions.
The sustainability report said the Ayala group consumed 482.5 million kilowatt-hours of electricity and nearly 3.1 million cubic meters of water in 2008 while producing 260,358 tons of carbon emissions.
No comparative figures were provided.
In Ayala shopping malls, power use may still be reduced by a fifth, complementing existing solid waste management and recycling programs. Manila Water will continue building water treatment plants and make sure other firms don’t discharge waste and further pollute the Pasig River.
On the economic side, the Ayala group paid P24.2 billion in taxes in 2008, gave P22 billion in salaries and benefits to more than 36,400 workers, and donated P333 million to charity, the report said.
Ayala said the report complied with the minimum level "C" of the Global Reporting Initiative, an international body which has set standards in sustainability reporting.
Arnold P. Salvador, executive director of the Management Association of the Philippines (MAP), said a few companies have started producing sustainability reports.
He said the association’s yearly competition for the best annual report already gives "bonus" points for companies that include a sustainability assessment in their reports to stockholders.
Of the 38 publicly listed companies that made it to the semifinal round of this year’s MAP best annual report competition, a little over 15% had sustainability reports, he said. There are more than 240 companies traded on the stock exchange.
For now there will be no marching orders or targets, Jaime Augusto said, adding that the message to Ayala managers was that business didn’t have to be "cutthroat."
"These are not the traditional metrics required of a manager," he said. "We prefer the soft approach."
The Zobel brothers said it was still "a matter of choice" to enter new businesses like mining and power, but Jaime Augusto said Ayala would be comfortable in renewable energy given the "right opportunity."
"Why should mining not be an important industry in our country? We only have so many natural resources, we should use it for the betterment of our people ... It’s terrible that we should not be in mining as a progressive industry," Jaime Augusto said.
In the end, Ayala will tend to shy away from businesses that "don’t feel right."
"You’d be surprised at the amount of debate that takes place when we are deciding on a particular sector to find exactly what the implications are. It is really changing the way we think. In that sense it may limit the things that we do and don’t do," Fernando said.
"At the end of the day what has served us well as a group over the years is the reputation of the company and the brand. We need to constantly reinforce that." -- with Don Gil K. Carreon
BusinessWorld, November 5, 2009
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