12 Aug Good governance and laying the groundwork for sustainable growth — 2
(2nd of two parts)
Corporate leadership entails business transparency, integrity, and accountability, which are manifested in SM’s publication of Integrated and Sustainability Reports, its conduct of forums and public briefings, and its accessible company website, among others. Transparency invites all forms of feedback, including scrutiny, which SM welcomes from its investors and all stakeholders. We use feedback to improve our corporate governance (CG) and Environmental, Social, and Governance (ESG) initiatives alongside business performance. Doing this expands and further strengthens the circle of business trust such that investors, shareholders, and stakeholders see actual results of efforts towards actively engaging with them.
SHARED RESPONSIBILITYGood governance becomes an even more effective tool when it is a shared responsibility and when everyone does his or her share in upholding the values of fairness, accountability, and integrity.
While the tone is set from the top, it is crucial that everyone in the organization should be involved not as mere participants but as stakeholders. SM directors, key officers and leaders attend CG training at least annually pursuant to regulatory requirement. Such a venue is used to keep leaders and management abreast of CG and ESG trends that affect business performance and strategies.
Other than SM’s annual stockholders’ meeting, the company communicates and engages with all of its stakeholders through various communication channels, such as social media and the company website. SM recognizes that the business becomes more meaningful to its customers, shareholders, and all other stakeholders when they can take part in the growth journey.
SM Investments practices good CG in all its dealings with all stakeholders, investors, business partners, creditors, customers, and employees because it believes that good CG will provide long-term growth, sustainability, and success. Its good CG framework and practices are part of the company’s core values on fairness, integrity, accountability, transparency, and stakeholder engagement. The company is recognized for practicing good CG through the ASEAN Corporate Scorecard alongside various awards and recognition.
In SM, running the business is anchored on values set by its founder, Henry Sy, Sr. or Tatang as he was fondly called. As part of its DNA to serve communities, the company values encompass the ESG aspects of the business from the get-go.
In a book written by Daniel Aronson called The Value of Values, he explains a framework called CORE which stands for Customer, Operations, Risks, and Employees.
Aronson said that the “crux of any business” are the customers. In a similar manner, Tatang instilled a high standard of service to SM’s patrons with customers at the heart of SM for 65 years.
The author also explains that when companies assess their operations through the lens of their values, they “uncover hidden inefficiencies.” The kind of business pragmatism in SM becomes a good tool in confronting complex business challenges such as the recent pandemic. It ensured sustainable returns to shareholders while still upholding the regulatory and environmental standards. This also applies to SM’s practical approach towards sustainability where it assesses what is feasible and works at where it can make the most impact such as in energy efficiency, efficient use of water resources, waste management and community engagement.
As examples, SM’s property development arm, SM Prime Holdings, is working towards reducing its ecological footprint through solar rooftops, water recycling systems, the adoption of air conditioning inverters and installation of standard Light-Emitting Diode (LED)-lighting and motion detectors on its escalators, solid waste management, advanced water conservation practices and green building developments. Currently, it sources more than 50% of its electricity from renewable energy across all its properties and facilities nationwide.
SM has been recycling water since the 1990s, treating an average of 1 billion gallons annually in past years to repurpose for mall operations including toilet cleaning and landscaping use. It has integrated rainwater harvesting systems in over 30 malls, particularly in flood-prone areas. It made another breakthrough in water usage by treating rainwater into potable water in SM City Baguio.
SM Prime also partnered with GUUN Co. of Japan to actively participate in developing infrastructure for systematic waste management and resource recovery.
The third is all about risks. “Companies often identify risks sooner when seeking to further their values,” says Aronson. Risk means that the vast legacy of the conglomerate would be at risk. To help manage risks, SM has started to integrate ESG risks into its risk registers, realizing that these need special attention because of their evolving, interconnected, and long-term nature.
The most important point Aronson made is about employees and that if the company wants to get the best people, their business values should align with the company’s.
SM employees are educated on CG and ESG through the employee onboarding and training program and awareness campaigns. Through the Orientation for New Employees of SM (ONE SM), new employees are given an overview of SM’s CG framework, including the different corporate policies and its various components. A substantial portion of the orientation is devoted to discussing SM’s core values and the Code of Ethics, highlighting the roles that each can play in the development of the organization’s CG culture. The Governance, Risk and Compliance Group collaborates with the Human Resources Group, Internal Audit Group, and other teams to continue improving this program for all employees.
SM’s teams exemplify Tatang’s entrepreneurship, drive, teamwork, leadership, and, most of all, business integrity. What Tatang proved is that acting on one’s good governance values can be a very good business strategy. And in his case, it was all about the philosophy that business growth and social growth go hand in hand.
The mantra of good CG cannot be just about the company and its shareholders. It must go beyond compliance with regulatory directives. It must consider fair and acceptable behavior, among others, to those who are more vulnerable, even if it means accruing less to the bottom-line.
One can always talk of governance at length but the true challenge, however, is not in extolling the virtues of good CG. Rather, it is what happens after that. The challenge is measuring how far we have moved forward and how much of the CG proactive culture genuinely influences our ways of working. What we want to achieve is having the comfort that values, principles and practices are fully in place, reviewed and updated even when no one is looking and even if it does not always pay off.
Amando “Say” M. Tetangco, Jr. has been serving as the first independent director chairman of the Board of SM Investments Corp. since 2023. He is also the vice-chairman of SM Prime Holdings, Inc., and is an independent director of other companies. Prior to joining SM, Mr. Tetangco was a career central banker for over four decades. He eventually assumed the post of governor of the Bangko Sentral ng Pilipinas and chairman of the Monetary Board, serving two consecutive six-year terms from July 2005 to July 2017.