MB ANNIVERSARY SPECIAL
There has been a significant shift in the way businesses have embraced the concept of sustainability. Wherever we go, we see the efforts of different companies to become “green.” Is this just a fad, a marketing push, or an “in thing” for businesses? Or should sustainability efforts come in the form of strategic initiatives that benefit the company, the environment, and the community?
There are several considerations when it comes to business interest and sustainability. For instance, how can corporations ensure that they go beyond compliance and really embed sustainability into their business strategies? Another consideration is how can businesses balance and continue to maximize their financial performance while being socially and environmentally responsible? In order to address these concerns, it is important for corporations to understand how being sustainable makes perfect business sense.
Facing environmental disasters
The Philippines has been hit by several typhoons this year. In October alone, four consecutive typhoons – Maymay, Neneng, Obet, and Paeng have devastated parts of the country. According to the National Disaster Risk Reduction and Management Council (NDRRMC), Paeng’s onslaught resulted in ₱4.5 billion worth of infrastructure damage and 156 reported fatalities. Sixteen tropical depressions and storms have already hit the country in 2022 and let us not forget the devastation caused by Typhoon Odette late last year.
The World Meteorological Organization reports that stronger storms, floods, and extreme temperatures have increased in number by a factor of five in the last 50 years. The report further stated that these disasters are driven by climate change and more extreme weather. Another report from the Intergovernmental Panel on Climate Change (IPCC) listed down extreme weather events that occurred between 1998 to 2017 globally and their link to climate change. It cited Super Typhoon Yolanda as an example of a very strong natural disaster that can be attributed to the rise in ocean heat content and sea levels.
Responsibility of businesses
Businesses must recognize that they have an important role to play in a number of social and environmental issues, including poverty and income inequality, climate change, and environmental protection. Corporations do not operate in isolation. Our companies and employees are parts of larger environments that are affected by the way we run our businesses.
The UN Guiding Principles on Business and Human Rights (UNGPs) state that businesses should take “proactive steps to identify, mitigate, and address adverse impacts with which they are involved, including impacts resulting from climate change.” In addition, the UNGP urges businesses to align their climate actions with the UN Sustainable Development Goals, specifically those that aim to protect the environment, support social protection, and provide sustainable livelihood. Abiding by these principles takes leadership and commitment from the business sector. Therefore, it is pertinent that we incorporate sustainable practices in our business strategies.
The ‘triple bottom line’ approach
One of the important concepts in sustainable business strategies is what is known as the “triple bottom line.” This refers to how businesses should be aware of their social and environmental impact while still earning profits. The triple bottom line concept can be better simplified through the three Ps: People, planet, and profit.
In BPI, we have our unique formula in accounting for the triple bottom line. Like many companies, we use the Environmental, Social, and Governance (ESG) factors to measure our sustainability initiatives, but with a twist. We added a second “E” for Economic making it our ESG+E2 formula. E2 represents economic gain or profit because contrary to popular belief – sustainability practices can be business enablers and do not have to be a business expense.
Why sustainability makes business sense
Adopting sustainable practices in our business strategies has a lot of benefits. The most apparent one is it enhances our social responsibility efforts. More and more consumers are patronizing ethical and sustainable businesses in recent years. According to the 2020 global survey conducted by Accenture, 60% of their respondents have made more sustainable, ethical, and environmentally friendly purchases. A study cited by First Insight and the Baker Retailing Center at Wharton School of the University of Pennsylvania found that generation Z (those born between 1995 to 2010) prefer to buy from sustainable businesses. It also found that this younger generation is influencing older ones to choose sustainable products and businesses. A growing number of consumers now want to buy from companies that align with their personal values, including saving the planet and being more sustainable. If businesses want to stay relevant, this is something that we should definitely keep in mind.
Two other benefits of sustainable business practices are the reduction in costs and the decrease in physical risks to businesses and employees. One of the most common sustainable business practices is the implementation of energy efficient measures. For example, reducing paper printing, using LED lights in offices, and installing inverted-type air conditioning units are not just good for the planet, but are also cost effective. Moreover, conducting environmental risk assessment for the businesses can help reduce the physical risks brought about by unexpected disasters. This measure can help prevent additional expenses that can be incurred from accidents and environmental hazards.
Finally, sustainable business practices can contribute to more profit. A 2018 survey by the Bank of America Merrill Lynch discovered that companies with better environmental, social, and governance (ESG) ratings than their peers “produced higher three-year returns, were more likely to become high-quality stocks, were less likely to have large price declines, and were less likely to go bankrupt” (cited by the WEF, 2020).
In the local banking scene, we (BPI) have disbursed ₱157.8 billion to renewable projects and ₱28 billion to energy efficiency projects. Moreover, 48% of the bank’s outstanding loans to the energy sector is directed towards renewable energy and has also disbursed ₱35.2 billion to climate resilience projects. All these supports the UN Sustainable Development Goals (UN SDG) on affordable and clean energy (Goal 7) and on industry, innovation, and infrastructure (Goal 9).
On top of the climate-related goals, our microfinance arm, BPI Banko, has disbursed ₱9 billion in loans to self-employed micro-entrepreneurs (SEMEs). The bank has also disbursed a total of ₱157-billion agribusiness loan disbursements as of last year contributing social protection measures as prescribed in the SDGs (Goal 1: No Poverty, Goal 2: Zero Hunger, Goal 8: Decent Work and Economic Growth). These are concrete proof points showing how sustainability is a viable business strategy.
Alignment with the government’s environmental policies and sustainability initiatives
The abovementioned sustainability practices are aligned with some long-standing environmental policies set forth by the Philippine government. These policies have institutionalized the responsibility of government agencies and private entities in helping protect and conserve our environment. One example is the Environmental Impact Assessment (EIA) Law (Presidential Decree 1586), which mandates government agencies, government-owned or-controlled corporations (GOCCs), and private companies to prepare environmental impact studies for any project or activities that affect the environment. Through this law, businesses must ensure that they are able to obtain an Environmental Compliance Certificate (ECC) before they can operate in environmentally critical areas.
Another example is the Environmental Awareness and Education Act (Republic Act 9512), which aims to promote national awareness on the role of the environmental conversation and ecological balance towards sustained development. The law further requires concerned government agencies to undertake capacity-building programs (trainings, seminars) on environmental education and livelihood programs. Companies can explore programs that have the potential to promote livelihood, entrepreneurship, and environmental advocacies to ensure that they can contribute to the law’s objectives.