By Caesar Vallejos, EBC Correspondent
Headed by Jaime Augusto de Ayala (JAZA), the first Filipino and the first from Southeast Asia to be recognized by the United Nations as a Sustainable Development Goals (SDG) Pioneer, the Ayala Corporation presented its sustainable initiatives to members of the Nordic diplomatic community and European and Philippine businessmen in a forum on Corporate Sustainability at the Shangri-La at The Fort last October 26, 2017.
A company that builds businesses
Ayala is one of the largest conglomerates and probably the oldest business house in the Philippines. Its CFO and Chief Sustainability Officer, Mr. Jose Limcaoco said that Ayala is not a company that makes investments but more of a company that builds businesses.
“We are not in the habit of just making an investment for its financial return, my Chairman says that the reason we exist is to build a business and to grow a business and to change the lives of Filipinos,” Limcaoco explains.
Philanthropy versus Corporate Social Responsibility and Creating Shared Value
Limcaoco differentiated the concepts of philanthropy, corporate social responsibility (CSR) and Creating Shared Value (CSV) to top executives, entrepreneurs, leaders of local and foreign business organizations and chambers of commerce who attended the corporate sustainability forum.
“Like many companies, we started setting aside a number of funds for philanthropic causes but really, that is not quite it,” he said.
“Philanthropy is good by itself where you set up a little fund for a group of people in need but as you develop your culture and thinking about what the purpose of your company is, you begin to move towards corporate social responsibility,” he narrated.
The Ayala executive defined CSR as an initiative when a company begins to develop projects that help communities. However, Limcaoco explained that from CSR, there is a more important step to push this initiative further.
“CSR is good but you begin to realize that it needs that little additional push when you think that your company is creating shared value with all your stakeholders,” he stressed.
CSV is thinking about shareholders, employees, and the community that the company works with and where it exists.
Shareholders are key, but…
“You begin to think about the suppliers who rely on you for their incomes…your customers…the whole environment and that’s when you realize that for you to sustain your existence, you cannot just be thinking about your shareholders,” he shared.
He further stressed that “the shareholders are key but they are not the only key people you exist for. Because if you only think about your shareholders, you will not last like 180 years like Ayala Corporation lasts.”
Creating Shared Value and the UN 17 SDGs
Limcaoco simplified Ayala Corporation’s handling of CSV every time it invests and decides to build a business with these questions:
- Is there a problem in the Philippines or in our communities that we want to address?
- Is there an innovative solution that we can provide to solve this problem?
- Can you take that solution to solve that problem and build it into a profitable business model that you can scale?
- What can we do differently in a business?
“We adopted the UN 17SDGs as the framework to guide us within Ayala Corporation,” he said. However, he admitted, “It is foolish to think that a company can do all 17.”
The Sustainable Development Goals (SDGs) is a set of 17 Goals adopted by the United Nations and its member states. They identify the global development priorities for the next 15 years, aiming to enable countries to take action towards alleviating poverty, protecting the planet, and promoting prosperity for all.
He cited JAZA’s view that “businesses cannot survive in communities rife with inequity and in a degraded environment, ignoring the challenges faced by the world today threatens our ability to create long-term value and jeopardizes our enterprises, markets, and entire societies.”
Case studies in sustainability
The Ayala Corporation is in education because it saw a need for an affordable education and accessible education.
“What we realize in education is that we are not out there to build the next Harvard, we’re not out there to build the next University of the Philippines, people want an education because they want to get employed at the end,” Limcaoco said.
Ayala’s business model for education to ensure that students are employed immediately after graduation.
“To remain relevant, to remain building the trust of communities, businesses must contribute to the society as a whole and to ensure the progressive development of the markets they serve,” he said.
Ayala Corporation won the concession to fix the water problem of Metro Manila in 1997. During that time, only 24% of the east zone of Metro Manila had running water and 65% of the water that is left in the reservoir was lost. “To date, 100% of the east zone of Metro Manila has water, 24 hours a day, 7 days a week and we only lose 11% of the water that leaves the reservoir. That’s world-class standards,” Limcaoco cited.
It also subsidizes low-cost water to poorer areas and gives business to small contractors, and provides affordable and accessible healthcare.
While it is engaged in the renewable energy business, Limcaoco admitted having a couple of coal plants. To drive accountability, “we have projects to mitigate the effects of greenhouse gas emissions from our coal plants,” he said.
Limcaoco mentioned the company’s Kasibulan Project, an ambitious project to reduce greenhouse gas emissions through a nationwide forest protection and reforestation program that costs about 300 million pesos over the next 10 years.
Ayala’s property arm also reported that it would be carbon neutral in its commercial properties by 2022.
For the first time, Ayala Corporation integrated its financial and sustainability reports. “We only have one book today that not only measures our financial reports but also about our environmental and societal impacts and our governance standards,” he said.
