MAP Insights
By Niceto S. Poblador
The title of this essay was the main theme of the recently concluded 17th Management Association of the Philippines (MAP) International CEO Conference 2019 which was held at the Makati Shangri-La. This piece is intended to interject our own impressions and perceptions on this vision statement which we hope will complement those of the many informative and insightful presentations made at the Conference.
To our minds, the concept that captures the principal thrust of the Conference, one that we believe is the common thread that brings the diverse presentations into coherence, is the notion that in today’s complex, fast-changing, and uncertain economic environment, business should pursue sustainability as its major strategic concern.
This is easier said than done, however, because the term “sustainability” has many shades of meaning and is subject to many interpretations. From an environmental and ecological perspective, sustainability means the continued co-existence of human society and the larger physical and biological systems in which it is embedded. When we speak of “sustainable development,” we usually have in mind our ability to pursue our human development goals — for example, those embodied in the UN’s Sustainable Development Goals — in a manner that preserves our ability to continuously draw resources from the planet and the larger ecosystem.
From a narrow, institutional point of view, sustainability simply means the ability of a social entity or an organization to survive over an extended period of time. It is in this narrow context that we discuss sustainability as business strategy.
The presentations at the Conference have shown that in order to thrive in an increasingly hostile and volatile environment, an organization must develop its ability to draw resources from the different segments of its environment on which it depends for its sustenance, notably its consumers, its workers, its business partners, and the community of which it is an integral part. Moreover, to survive in a world which is characterized by frenetic and unpredictable changes in technologies and markets, and dramatic transformations in the social, economic and political milieus, organizations should develop the capacity to adapt.
These, then, are the three essential elements of strategies for sustainability: a long-run perspective, a focus on stakeholders, and an emphasis on adaptation through innovation.
In his keynote address, Henry K. H. Wang stressed the relationship between business sustainability and sustainable development, suggesting that the fundamental logic behind strategies for sustainability is that business cannot long survive in an unsustainable environment.
By definition, a strategy of sustainability implies a long-term time horizon. Conference speaker Andrew HW Chan suggested that business should aim for the maximization of economic value rather than the maximization of short-term profits. In setting the tone for the Panel Discussion portion of the conference, MAP’s Alma Jimenez suggested a shift in focus away from shareholder wealth towards the economic well-being of the firm’s other stakeholders as a way of realizing long-run business objectives.
In the exchanges that followed, the various discussants narrated how organizational sustainability can be achieved by creating value for stakeholders. Illac Diaz, founder of the Liter of Light Foundation, showed how an innovative technique for producing solar lights by recycling used plastic bottles and converting these into light bulbs using simple solar panels as a source of energy can create value not only for customers but also for entire communities. Jeannie Javelosa, prime mover of the Great Women project, implemented in collaboration with the Philippine Commission on Women, showed how this social enterprise has succeeded in giving access to the world of fashion to products of women in poor, inaccessible rural areas of the Philippines.
Both initiatives are in keeping with Deepa Prahalad’s advocacy of “bottom-of-the-pyramid” strategies for achieving traditional business objectives by sharing value with those who contribute to the process of value creation, and who have a legitimate stake in the business enterprise — those, in particular, who are the least economically endowed in society.
We have noted elsewhere that one of the greatest anomalies of our time is the ever-widening gap in income and wealth between the very rich and privileged few in most societies, and the masses at the bottom of the social pyramid that are mired in abject poverty. Most social analysts regard this continually widening gap as unsustainable. The rationale behind sustainable strategies, along with Deepa Prahalad’s concern for the well-being of the bottom of the pyramid, suggests that it is in the long-run strategic interest of business to address the issue of non-inclusive growth.
The shareholder-stakeholder issue that unraveled at the Conference suggests that there is no inherent conflict between long-run shareholder wealth maximization and creating value for stakeholders, as both Andrew Chan and Ms. Jimenez have advocated. What it does suggest is that value shared with stakeholder should be treated not as costs to be minimized, but as investments intended to enhance future productivity. In this way, the business enterprise will be able to produce higher economic value in the future and enhance the residual value that goes to shareholders.
This article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines or the MAP.
Niceto S. Poblador is a retired UP Professor, and until recently was Professorial Lecturer at the UP School of Economics.
