INCOME inequality is no longer a “taboo” subject for many of the world’s companies as inclusive business models have become buzz words in boardrooms across the globe.
In a forum on Tuesday, Makati Business Club Co-Vice Chairman and Ayala Corp. Chairman and CEO Jaime Augusto Zobel de Ayala said back in the 1980s when he was in business school, inequality “was not a topic of conversation.”
Ayala said even as far back as 50 years ago, the role of corporations as agents of social change was unheard of. But now, addressing society’s pain points has become mainstream.
“In fact, it was the exact opposite. Some people would look down on a role that business would play that was addressing pain points in society,” Ayala said. He said the shift that recently happened to corporations worldwide was fascinating, especially
since inequality and pain points in society were initially thought of as a concern only of emerging market economies.
Meredith Sumpter, the CEO of the Council for Inclusive Capitalism, agreed with this and said the world finds itself at an inflection point that is projected to last years.
This “broad inflection point,” Sumpter said, will redefine not only how corporations behave but also change the world’s economic system. It took two to three decades for the 20th century economic system and the world was already poised to begin a 21st century economic system, she said.
This new economic system, Sumpter said, will see the rise of Asia. This will be fueled by the rapid growth of the Asian middle class whose needs have to be met not only by governments but also the private sector.
Not government alone
This means narrowing inequality in order for more people to participate in economies. This, Sumpter said, cannot be addressed by governments alone.
Addressing inequality, she said, will require a lot of creativity which the private sector can provide. Sumpter said the private sector can find ways to meet the needs of the population while attaining profitability.
“The trigger points for society are changing so much that you can talk about healthy growth rates and you can have healthy growth rates in both the US and the Philippines. But a healthy national growth rate doesn’t mean that everyone who is working to provide inputs into that economy are actually being included in that growth,” Sumpter said.
Adopting inclusive business models means taking the Sustainable Development Goals (SDGs) to heart. This means taking care not only of people and economies but also the planet.
The 17 SDGs were adopted in September 2015 by around 193 United Nation member-countries like the Philippines by 2030. The Global Goals have around 169 targets with 230 global indicators adopted six years ago.
Part of the goals are those that will help the world adapt and mitigate the impacts of climate change. This has given rise to the Paris agreement set at the Conference of Parties, where countries recently committed to adopt aggressive policies to cut greenhouse gas emissions.
Many countries have committed to “net zero”—to bring down carbon emissions to zero. This, Sumpter said, could lead to greater inequality, thus the need for companies to subscribe to the “just transition.”
Such just transition could render many workers jobless, starting with those in the fossil fuel industry. In many parts of the US, there are also small towns that depend on the oil drilling industry to keep their communities alive.
Without a just transition, Sumpter said, the affected people will fall behind. “When that industry goes away, communities will dry up and there’s a real social concern at the core of that transition. Even so we’ve got to transition. The climate is telling us, we have no choice.”
“As you’re designing your transition plans, you need to think about the people who are going to be impacted and that is going to be [crucial]. If you don’t, we’re going to be increasing inequality,” Sumpter added.
While corporations were “on board” with the idea of making a just transition, Sumpter said, many found it difficult to make concrete actions that would be deemed part of a just transition.
Sumpter observed that while governments and civil societies were well briefed on how to make a just transition, there “was nothing written” for the private sector. Companies lacked the information and concrete examples of how to adopt just transition in their operations.
This, she said, is where the 11-month old Council for Inclusive Capitalism has been helping. The knowledge sharing that happens between the world’s CEOs can provide insights on going about a just transition.
Sumpter said these ideas may not be implementable in all companies located in countries worldwide, but CEOs can consider them and tweak them to fit their unique circumstances.
“The council is doing such a great job, number one, in creating coalitions of the willing as they say; and number two, it’s just a great learning platform because everybody has new ideas of how to achieve these things and suddenly you get this movement,” Ayala said.
“What you’re doing in the council is really fundamentally building coalitions and cooperation between entities that generally have not done and then being a source of information for how to address these problems is an extraordinary initiative,” he added.