The road to transformational growth

(President, Financial Executives Institute of the Philippines)

MANILA, Philippines — Leading think tanks, analysts and multilateral agencies have recently forecasted that the Philippines will be a high-middle-income country within this decade and the 18th-largest economy in the world by 2050. This growth is expected to be fueled by our traditional economic drivers of remittances and BPO revenues, coupled with the demographic dividends from a growing and young population. It is against this backdrop that corporations and entrepreneurs have developed their plans and budgets to make the necessary investments that will allow them to capture opportunities and expand their businesses. And yet, given the volatile environment filled with the complex issues that we face, it can be difficult to imagine how we can achieve our growth agenda.

As I reflected on these, I was reminded of a quote attributed to Andy Grove that best summarizes his book Only the Paranoid Survive: “A corporation is a living organism; it has to continue to shed its skin. Methods have to change. Focus has to change. Values have to change. The sum total of those changes is transformation.”

This is the real challenge of our times – how we can achieve “transformational growth” in what is perhaps the inflection point that will either see us rise to expected economic success or muddle along with the rest of the world. Which then begs the question, “How do we make it happen?” Allow me to propose three components that I believe drive transformational growth – sustainability, diversity and digitalization.

The first component: Sustainability In the realm of ESG, environmental sustainability stands out as a pivotal pillar. The urgency to preserve our planet has never been more apparent, with climate change and environmental degradation posing existential threats.

The Philippine government has demonstrated its commitment on the global stage by signing key international agreements. The Kyoto Protocol in 2003 and the Paris Agreement in 2016 affirmed its intention to reduce greenhouse gas emissions and combat climate change. And more recently, it has actively participated in the Conference of Parties (COP) meetings, including COP28, where nations come together to address global environmental challenges. These efforts underscore the country’s commitment to preserving biodiversity and fostering sustainability, nationally and internationally, and encourage us to integrate environmentally sustainable practices into our daily lives.

As finance executives, we must recognize the impact our decisions can have on the environment and strive to align our corporate strategies with sustainable practices. We wield considerable influence over resource allocation and corporate decision-making. Incorporating ESG metrics into financial evaluations, encouraging disclosure of environmental impact, and fostering a culture of environmental responsibility are integral steps. Moreover, promoting responsible investing and engaging in collaborative industry initiatives can amplify our impact.

At ALI, realizing that our products and services are valued by generations, we have ingrained sustainability at our core. This thrust has driven positive change, yielding substantial benefits. Our journey began in 2007 when we formalized sustainability as a guiding principle in land use and development. Then, in 2009, we launched our first sustainable estate in the country, Nuvali, spanning 2,290 hectares and straddling the cities of Sta. Rosa, Cabuyao and Calamba in Laguna. During the same year, our board formed a Sustainability Committee to oversee Ayala Land’s sustainability program.

In 2014, following a materiality process, we identified our four focus areas: site resilience, pedestrian mobility and transit connectivity, resource efficiency, and local economic development. Fast forward to 2017, we announced our carbon neutrality program, wherein we aimed to neutralize scope 1 and 2 emissions from our commercial properties.

In 2021, aligning with global efforts to prevent temperature rise from exceeding 1.5°C, we announced, as part of the Ayala Group of Companies, our commitment to achieve net-zero emissions by 2050. Our business-as-usual growth scenario predicts a simultaneous rise in carbon emissions, necessitating immediate and critical interventions. To address this now, our proactive measures involve a comprehensive strategy that includes the increased use of renewable energy and sustainable sources alongside the decarbonization of our supply chain and downstream activities. Anticipated results include an emissions reduction of over 50 percent of our 2030 target compared to the business-as-usual scenario, propelling us significantly closer to our 2050 goal of net-zero emissions.

Along this journey, our sustainable practices have not only aligned us with the values of an evolving consumer base demanding more livable spaces but have also encouraged a culture of innovation within our organization. Encouraging eco-friendly solutions has led to the advancement of pioneering concepts and developments in our country. Among these are the One Ayala Integrated Transport Hub, the transit connectivity and pedestrianization of the Makati CBD, BGC, and our other estate developments, circular waste management systems aimed at diverting waste that would otherwise go to landfills, and recycling practices, which have led to the commercial production of eco-bricks and pavers and precast walls and stairs.

Including sustainability in our business practices and strategies not only protects our environment for future generations but also positions our companies for resilience and long-term growth.

The second component: Diversity Diversity, as defined by the Merriam-Webster dictionary, is the condition of having or being composed of differing elements or qualities. It is within this context that I refer to diversity as a growth enabler, fostering an inclusive environment that values and learns from diverse backgrounds, experiences, and perspectives. Recognizing the importance of diversity acts as a catalyst for innovation and untapped potential. Diverse teams bring fresh approaches to problem-solving, stimulating creativity and leading to more holistic solutions to complex challenges. A Boston Consulting Group study pointed out that companies with more diverse management teams had 19 percentage points higher innovation revenues than those with below- average diversity scores. In addition, inclusive companies are 1.8 times more likely to be change-ready than their less inclusive peers.

ALI, led by Meean Dy, the company’s first female CEO in its 35-year history, is strategically incorporating talents and experts from various fields – including digitalization, HR and hotel operations. As the company continues on its customer-centric cultural transformation, which requires innovative thinking, creativity, and change readiness to be successful, it recognizes the need to bring to the table diverse skill sets, expertise, and backgrounds to provide unique problem-solving approaches while fostering a dynamic environment that allows ideas to flourish. This year, ALI will establish a council to develop its diversity framework and initiatives.

The third component: Digitalization In the rapidly evolving landscape of today’s global economy, digitalization is not a mere choice; it is imperative not only for growth but also for survival and relevance. Nations and companies face complex challenges ranging from managing vast amounts of data, ensuring efficient and transparent operations, and enhancing engagement with customers and stakeholders. Digitalization is the key to unlocking innovative solutions for these challenges.

In the Philippines, the government has been actively promoting digitalization through initiatives like the National ICT Ecosystem Framework, which focuses on enhancing the country’s digital infrastructure, fostering innovation, and promoting the use of technology for economic growth, and the E-Government Master Plan, which “aims to create a networked and collaborative environment for improved public service delivery” through the digital transformation of essential public services. Recognizing that digitalization is not just a technological upgrade but a strategic imperative, the Philippine government’s efforts exemplify the crucial role of embracing technology for national development.

Over the past decade in ALI, we have diligently built our digital foundation by following a roadmap, establishing and investing in our captive BPOs, adopting and continuously upgrading our enterprise resource planning system, and fortifying our cybersecurity measures. Today, we have embarked on Digitalization 2.0, with a focus on elevating our customer’s experience.

As we refine this strategy, we have brought in industry experts to ensure our approach is not only comprehensive but also superior in delivering value to our stakeholders. Digitalization is not merely a technological shift but a strategic move to remain at the forefront in an increasingly competitive and digital-centric world.

Transformational growth Why do sustainability, diversity and digitalization lead to transformational growth? The answer lies in recognizing that these are not isolated endeavors; they are interwoven threads shaping the fabric of a future-ready organization.

Sustainability guarantees our longevity and adaptability. Diversity brings depth to our perspectives, fostering innovation and resilience. Digitalization, the backbone of modern enterprises, allows us to efficiently deliver new products and services, find new ways to engage customers, and turn them into lifelong partners.

These three components are key to achieving Ayala Land’s aspiration to grow at two times the country’s GDP or to double its net income by 2028, translating to an annual compounded growth rate of 15 percent.

As finance executives, we are responsible for navigating our organizations through these challenging times. It is incumbent that we collectively harness the power of sustainability, diversity and digitalization to chart a course toward a future marked by growth and collective prosperity.

(Augusto Bengzon is the CFO of Ayala Land Inc. This was his speech at the FINEX 2024 Inaugural Meeting and Induction Ceremony held at the Manila Polo Club last Jan. 24).