Reinventing businesses for a sustainable future

By Mhicole A. Moral

As the world continues to grapple with the challenges of climate change, economic growth, and social responsibility, business leaders are increasingly focusing on sustainability and long-term success. In order to thrive in the future, many businesses are looking for ways to reinvent themselves and adapt to new realities.

According to the Ernst & Young’s (EY) latest “CEO Outlook Global Report,” 86% of chief executive officers (CEOs) believe that sustainability is a key driver of growth, and 85% believe that it is essential for long-term success. The report also highlights that CEOs are increasingly focusing on sustainability, with 74% of CEOs stating that they have made significant changes to their business strategies in the past year to address sustainability challenges.

CEOs in the Asia-Pacific region, in particular, are actively evaluating the potential of their respective countries and seeking opportunities for sustainable growth. According to the 27th PricewaterhouseCoopers’ (PwC) latest CEO Survey, 63% of CEOs in the Asia-Pacific region are not confident about their company’s long-term viability despite 97% of them having implemented steps towards business reinvention. Thus, they are looking for ways to address the profitability challenges of the present while simultaneously reinventing their business to ensure future viability.

Nonetheless, CEOs in the Philippines see that the country is on track to becoming one of the fastest-growing economies in 2024. PwC found that 57% of CEOs based in the country believe that the global economy will improve over the next 12 months, slightly higher than the average of 40% in the Asia-Pacific.

Similarly, SM Investments Corp. (SMIC) President and Chief Executive Officer Frederic C. DyBuncio expressed his optimism about the country’s economy, sharing similar views with most multilateral organizations that the Philippines is seen to be one of the fastest growing economies this year, driven by private consumption among other factors.

“The Philippine economy is off to a better start this year with recent indicators affirming the view of a stronger recovery in the near term. Considering an environment of disinflation, there is a rising expectation that interest rates will move south,” Mr. DyBuncio told BusinessWorld in an email.

The SMIC executive sees opportunities in logistics and renewable energy, which he considers as critical areas for sustainable economic activity.

“Our country’s archipelagic feature has been a challenge to moving goods from Manila to Visayas and Mindanao,” Mr. DyBuncio shared. “Logistics is a good sector to be involved with, and as SM, we ourselves are big users of logistics.”

SMIC intends to grow its investments in 2GO, an end-to-end logistics provider, and Airspeed, which is focused on cross-border logistics. The group intends to grow both of these businesses.

“Another area we are focusing on is renewable energy. There is a demand to be met, and we need to ensure our own businesses’ energy security by generating electricity onsite at a price point that’s practical for us,” Mr. DyBuncio continued, adding that with the Philippine Geothermal Production Company, the SM Group will be able to provide steam to power plants that will, in turn, go to the communities that need them.

Meanwhile, Emmanuel V. Rubio, president and CEO of Aboitiz Power Corp. (AboitizPower), recognized the need for energy security during the country’s transition to renewables. In response, it is striving to maintain the availability and optimal efficiency of their various power generation portfolio, while simultaneously adding more capacities due to the limited energy supply caused by El Niño-driven factors.

“Taking into consideration the need for energy security amidst the country’s ongoing transition to more renewables, AboitizPower sees opportunities in liquefied natural gas (LNG), as a transition fuel, and nuclear energy, as a more permanent baseload pillar of a cleaner energy system in the future. There is ongoing due diligence in assessing the feasibility of these technologies, especially as it relates to energy affordability for the end-user,” Mr. Rubio said.

However, there are also significant changes or developments in the political, economic, and regulatory landscape that could impact business operations in the next few years.

For instance, any shift that might arise from upcoming changes in political leadership in the United States (US) will reverberate globally, as the US is a major trading partner.

“Any shift in foreign and economic policy due to a change in the political leadership in the US will reverberate globally,” SMIC’s Mr. DyBuncio shared.

“The upcoming US elections would determine the US administration’s bilateral relations with the Philippines on energy diplomacy and trade policy, as well as its stance on wider energy and economic issues,” AboitizPower’s Mr. Rubio noted.

The AboitizPower CEO added that the ease of doing business, geopolitical events that affect supply and logistics of imported fuel and materials, and the availability and reliability of transmission networks could all impact business operations.

In response to these significant changes, both SMIC and AboitizPower emphasize the importance of monitoring various risks, including inflation, interest rates, and ESG considerations.

According to Mr. Rubio, AboitizPower takes into account the whole electricity supply chain, including transmission and distribution networks, as well as all public and private stakeholders, when assessing potential risks and challenges.

“In that regard, we proactively manage our exposures to these risks by integrating safety measures, digital innovation, and operation excellence in our operations. We also keep an eye on the supply and price of fuel, such as coal and oil, and construction materials,” Mr. Rubio added. “This holistic approach considers the availability of transmission lines and the ease of securing the necessary permits and documents, that are in the hands of our colleagues in grid operation and in government, respectively.

Image from Freepik

SMIC, for its part, has quantified its climate impact by using the Task Force on Climate-Related Financial Disclosures (TCFD) framework and participated in WWF’s Corporates for a Better Planet Initiative. The group assesses risks to reduce impact by shifting to renewable energy sources to power operations, among other actions.

“We believe in giving equal attention to climate adaptation efforts to ensure the long-term resiliency of our businesses and the communities that we serve and which support our business. We have ingrained resiliency in our culture — allocating significant resources to incorporate disaster resiliency and sustainability in our infrastructure designs, equipping our people and communities in disaster preparedness, and advocating for disaster resiliency among local governments and international communities,” Mr. DyBuncio explained.

Both CEOs shared the steps their companies have taken to support the country’s transition to a more sustainable economy.

SMIC is committed to embedding sustainability in its business ventures with BDO’s approach to energy transition finance and sustainable bonds, SM Green Finds’ advocacy for green and responsible product selection and supply chains, and SM Prime Holdings’ goal to reach net zero greenhouse gas (GHG) emissions by 2040.

AboitizPower, on the other hand, is guided by its purpose of “Transforming Energy for a Better World” and is actively integrating the UN Sustainable Development Goals (SDGs) into its business practices and community engagements. The company evaluates its performance based on the triple bottom line of people, planet, and profit, emphasizing the interconnectedness of social progress, environmental sustainability, and economic growth.

“We acknowledge the interconnectedness of these SDGs and how they serve as a shared blueprint to ensure all people have equal opportunities and lead a better life without compromising our planet. We try our best to integrate the SDGs into our business practices and community engagements because this enables us to bridge gaps and, ultimately, help build prosperity for all,” Mr. Rubio said.

Mr. Rubio also emphasizes the company’s plan to achieve a 50-50 thermal-renewable portfolio mix in the next ten years through new technologies and innovations in their power plants and distribution utilities to maintain high availability and efficiency.

“While the business of power generation and distribution is a profitable endeavor as it is, given the important role of electricity in economic growth and social development, AboitizPower also intends to shape the decentralization of energy in the Philippines to create smarter and more sustainable communities,” Mr. Rubio explained.

Meanwhile, SMIC continues to see itself as a company that is committed to growth, with the goal of providing the general public with a wide range of sustainable and diverse choices that are both convenient and accessible.

“We will continue to learn and innovate,” Mr. DyBuncio said. “There is still an abundance of ways to make our operations to make them more efficient and, at the same time, ecologically sound. We cultivate a culture of listening to our people and to those outside of our organization on how to improve our business models. And more importantly, we listen closely to what our customers need and want.”