From virtue to necessity
Last Oct. 8, a significant conference was held in Manila, billed as the “First Summit on Sustainable Development.” Hosted by the SM group of companies in partnership with the Australian Embassy and under the auspices of the Global Reporting Initiative (GRI), the global authority on sustainable development reporting headquartered in Amsterdam, the conference was encouragingly very well-attended. Just about every major Philippine conglomerate (the SM, Ayala, Aboitiz and Robinsons groups, among others) was present and represented by their major owners and top-level executives.
This good attendance indicated that the subject of sustainable development had definitely moved to the forefront of the collective consciousness of Asian enterprise, and that the summit may have signaled the possibility of the Philippines taking a leadership role in promoting it throughout the Asean region.
The subject of sustainable development had its origins in relatively recent historical events highlighted by major financial crises and a growing realization of escalating man-made threats to the overall health of our planet itself. Perhaps the first of these was the Enron scandal of the late ’90s, resulting in the bankruptcy of one of the biggest energy corporations in the United States. This event highlighted the futility of unbridled capitalism without the commensurate transparency on the part of top management and the board. It gave rise to the Sarbanes-Oxley Act, which introduced a plethora of corporate good governance practices and regulations, including the promulgation of mandated independent directors in corporate boards.
Good corporate governance became a byword and rapidly spread alongside globalization, perhaps giving the corporate world a feeling of assurance that the crisis had been adequately addressed, never to rear its ugly head again.
However, these good vibes turned out to be short-lived when the global financial crisis of 2008 struck with tsunami force, leaving in its wake the wreckage of erstwhile superstar American corporations such as Lehman Brothers and the American Insurance Group. This event, thought to be the worst financial debacle since the Great Depression, proved the view of many that financial reporting alone wasn’t a sufficient gauge of the overall health of a corporation. The crisis also gave rise to tighter regulation and mandated greater transparency in the banking and accountancy sectors via the Dodd-Frank Act.
More importantly, the succession of financial crises and the increasing concern about corporate practices that result in financial gain at the expense of the environment and the overall social fabric gave rise to the realization that good governance practices, conscientious deployment of financial, human and natural resources, and meaningful rather than self-promoting corporate social responsibility must be methodically identified, promoted and systematically applied as intrinsic elements of business and corporate behavior. Thus were born the United Nations’ 17 Sustainable Development Goals (SDGs) and the GRI.
The SDGs were meant to apply to society’s aspirations as a whole, but GRI’s mission was to transform them into a focused and structured system by which corporations could prioritize the goals most relevant to their respective enterprises, monitor their entities’ performance toward attaining these goals, and provide all stakeholders a more complete picture of a corporation’s health and behavior as a good corporate citizen.
GRI has accomplished this and more, such that the GRI framework has been legislated for common use by all listed corporations in the European Union, and is rapidly spreading worldwide. GRI also established a Standards Board for setting globally accepted yardsticks for sustainability reporting, an important pillar toward developing a common sustainability development language across borders.
The Philippines is in a position to take a lead role in promoting this common language in Asean. Spreading its use throughout the region will help realize the region’s goals of economic inclusion and enlightened environmental stewardship, thus transforming the virtue of sustainable development reporting into a necessity for sustained regional economic progress.
Roberto F. De Ocampo, OBE, is a former finance secretary and was Finance Minister of the Year in 1995, 1996 and 1997. E-mail: [email protected]
Business Matters is a project of the Makati Business Club.
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