By ANTONIO S. LOPEZ
San Miguel Corp. invests heavily in corporate social responsibility (CSR) projects and sustainability. If not too many people know about it, it’s probably because SMC Vice Chair, President and COO Ramon S. Ang prefers to do it that way, with little fanfare and publicity.
The amounts involved are not mere stunts. SMC spent P2.1 billion to build 8,000 homes for typhoon victims of Mindanao. It is spending P1 billion just to dredge the Tullahan River in Malabon.
San Miguel phased out its profitable plastic-bottled water business so as not to contribute to pollution. What people call global warming. Or climate change.
Relatedly, the company has pledged to cut water use by half, by 2025. Achievement is two years ahead of schedule. In 2018, SMC saved 8.84 million cubic meters of water—enough to supply nearly 300,000 homes. Additionally, San Miguel has planted one million trees.
To me, San Miguel’s best and biggest doing-good business is how it prices its products and services very reasonably.
SanMig beer is a monopoly product. It has more than 90% of the market. Yet, SanMig is one of the cheapest quality beers you can drink anywhere in this world.
SMC is the biggest power producer in Luzon, with 4,197 megawatts generating capacity. Yet, it prices its electricity at less than P3 per kwh, one-fourth the price of the biggest retailer on the island.
San Miguel plans to produce 1,200 megawatts of renewable energy, making it the biggest producer of renewable energy soon.
San Miguel also will be the biggest producer of water in Luzon. Ramon Ang promises to deliver to households the cheapest, cleanest potable water there is. For a start, the company will provide cheap water 24/7 to 24 water districts of Bulacan. It wants to produce water up to 3,800 million liters a day (MLD) at a cost of P35 billion.
San Miguel is the biggest producer of foods in the Philippines, processed foods like chicken, hotdogs, spam. Magnolia fresh chickens are at least 10% cheaper than its rivals in supermarkets. Yet, the quality of Magnolia chickens is far different from other chickens. There is no antibiotic residue, which could be harmful to one’s health.
SMC is moving into the rice business in a big way. It plans to import palay, not rice, by the thousands of tonnage, store them in huge silos with stringent temperature control (palay usually has 40% moisture), then process the palay into high-grade rice. The resulting by-products or waste is converted into feeds and fuel. The result: 100% recovery. Little or no waste. You get quality rice—cheap. Ang promises to plough back rice profits by supporting farmers, with seedlings, technical help, even money.
Free meals
San Miguel has opened a 1,000-sqm feeding center for Tondo’s poor to help beat hunger and malnutrition. Children, single mothers, the disabled, the elderly can walk in anytime for a pack of a hearty, nutritious meal.
San Miguel offers at least three million meals every year. That’s like feeding, for free, more than 4,000 people a day, assuming each person gets two packs a day. “We are spending good money here,” says Ramon Ang. Indeed, assuming P30 per meal, three million meals is P90 million a year. Plus the cost of running the operation for what, may be, forever.
The meals consist of pre-packed balanced meals and donations of unused, surplus food from restaurants, fastfood chains and convenience stores. Right away, two issues are addressed – waste and hunger.
Mayor Joseph Estrada keeps saying: “A hungry stomach knows no law.” So a third issue is addressed – crime.
Ramon Ang frames his doing-good business in terms of security. Food security. Water security. He adds a third – infrastructure security. Food to eat. Water to drink. Roads, rails, and airports (Boracay, and soon Bulacan) for you to commute to work or do business.
Ang calls it “creating an impact on important social, economic, and environmental issues.”
Food is 50% of household spending, especially by the poor. About 60% of communicable diseases, which afflict the poor, are water-borne. Food is about survival. Water is about quality of life. Infrastructure is about enjoying that quality life.
Infrastructure is a mind-boggling business. San Miguel is No. 1, being the owner or operator of 55% of tollroads, mainly the highways south and north of Manila and beyond.
They include the multi-level 51-km South Luzon Expressway, from Paco, in Manila, to Santo Tomas in Batangas. SLEX connects the business districts of Manila and Makati to the heartland of the Philippines’ industrial hub, booming Calabarzon.
SLEX will be connected by a connector road from Magallanes Exit in Makati to Balintawak, at the entrance to the North Luzon Expressway and TPLEX. SLEX will also be extended by 61 kms, from Santo Tomas, Batangas (and Calamba, Laguna) to Lucena City in Quezon province.
San Miguel has just about completed the 88.5-km Tarlac Pangasinan La Union Expressway (TPLEX), from Tarlac to Rosario, La Union. Even then says Ang, “we are already gearing up for extension, from Rosario to San Juan, La Union.” In effect, San Miguel has connected both ends of Luzon.
To produce cheaply, cement (a major component of infra), San Miguel has bought Holcim’s local cement business, valued at $2.1 billion. This will bring the down cost of cement and spur President Duterte’s P9-trillion “Build, Build, Build” program.
Also, San Miguel will build roads – using recycled plastic waste. It also produces glass, 97% of which is recycled glass.
But the biggest boon is yet to come—a $14-billion San Miguel Airport in Bulacan. It will have four runways, contribute P1 trillion to GDP, and employ up to 40 million directly and indirectly, assuming 20 million arrivals and each arrival attended to by two Filipinos.
Now, if only the government could rush the airport’s approval. Had the unlamented Aquino administration approved it the first time Ramon Ang proposed it to the government in 2014, we would not have had to endure the colossal traffic in the air, at the runways, and on land, at the terrible three terminals of NAIA.
Costing $14 billion, the airport will not cost a single centavo to the government and yet, the government will be its biggest beneficiary. In fact, it will make Duterte a great president, overnight.
Sustainability
Sustainability is the overriding theme of San Miguel’s 2018 report.
Ang reported “significant wins in the area of environmental sustainability.” Thus, “our water initiative, ‘Project 20×2025: Water for All’—which will see us cut operational water use by 50% by year 2025—achieved a landmark 25.3% reduction in 2018. What makes this milestone truly special is that we’ve exceeded our target of 20% reduction by 2020, a full two years ahead of schedule.
“Also in 2018, we rolled out the next leg of our sustainability program—addressing solid waste pollution. With the help of various stakeholders, we aim to make a difference across three important fronts,” Ang said.
He related: “Our first project will have us partnering with a host community to build a local recycling and sorting facility. Plastics will be broken down to become either feedstock or input to other materials that can be used in construction.”
Recycled plastic roads
“Our second initiative is the construction of the Philippines’ first-ever recycled plastics roads. Hard-to-recycle plastics will be converted into raw material for asphalt which can then be used for road construction. The project will help take plastic wastes out of our environment. We will be working with materials science firm Dow Chemicals to pilot-test this technology in select areas.”
The third major initiative is an investment of P1 billion for five years to dredge and revive the 59.24-kilometer Tullahan River, which starts at the La Mesa Reservoir, spans Valenzuela and Malabon cities, and drains into the Manila Bay.
“For decades now, we have been helping the local government clean up this major tributary, considered biologically dead because of pollution,” Ang noted.
Ang, also the SMC vice chairman and chief operating officer, likes to think that San Miguel’s business is development.
Or social responsibility
Development and social responsibility have always been the mission and battlecry of SMC, a focus that gained tremendous traction under SMC Chair Eduardo Cojuangco Jr. and President Ang.
Development means addressing the needs of the nation and its people to produce products and services of the highest quality and at the optimum price, that is, without shaking down its consumers and clients by charging the most reasonable price or rate, but still have enough profit to make its stockholders happy, leave enough cash for operation, future expansion and diversification, and of course, for government to collect its due share of taxes and fees.
Security
Ang has another word for development – security. In food, in water, in infrastructure and mobility.
On infra, SMC plans to extend SLEX to Bicol, a distance of 430 kms.
Other planned expansion projects in the SMC-PNCC joint venture pipeline with connections to either SLEX and the Skyway system include: (a) the San Pedro-C6 Laguna Lake Road that will link SLEx from San Pedro, Laguna to C6 in Taguig; (b) Skyway Stage 8 or Tanauan-Tagaytay Expressway; (c) Skyway Stage 7 that will connect Taguig to Commonwealth Avenue in Quezon City; (d) Buendia Interchange and Ramp Extension to Macapagal Boulevard; and (e) Skyway Stage 9 or Pasig River Alignment.
Also big is the MRT-7 project, a major component of SMC’s larger infrastructure master plan. “It is progressing well,” says Ang. The latest major rail project in the Philippines since LRT-2, MRT-7 is crucial to opening up the province of Bulacan, one of the country’s richest provinces, as a major growth center, much like Laguna and Cavite in the south.
In effect, SMC has connected the industrial center Calabarzon, the emerging agro-industrial center Quezon province, and the huge hinterland of Bicol.
SMC will also help develop the vast central plains of Luzon with its Bulacan bulk water projects, the MRT7 highway and railway, and the biggest infra of them all – the $14 billion Bulacan airport project.
The Bulacan airport
“Nothing of this magnitude has ever been completed. But we know that to truly solve our decades-long problem of land and air congestion and to fully tap our economic potential, our country needs a future-proof solution,” Ang told stockholders in June 11, this year.
Ang promises to break ground on what is a veritable game-changer before 2019 is over, following the Swiss challenge this July.
“This airport will be our biggest contribution to the Philippine economy, one that will generate millions of direct and indirect jobs; revive local industries and give rise to new ones; accelerate our exports; attract foreign investment; revitalize tourism, and boost national pride,” enthused the SMC president.
Cement acquisition
To backstop its massive infra ventures, San Miguel recently signed a share purchase agreement with LafargeHolcim Ltd., Europe’s largest cement company, to acquire for $2.15 billion its entire 85.7% shareholding in Holcim Philippines, the leading cement manufacturing company in the country.
“This acquisition will increase our foothold in the cement business and provide us the opportunity to expand our cement business nationwide,” gushed Ang.
Food business
Of immediate impact, however, is San Miguel’s food business.
“Our business is provide food security,” he says. It is not accident that San Miguel is the country’s largest food company. It is the biggest producer of beer, chicken, hot dogs, and spam. And soon, biggest in rice. That is food security.
San Miguel is also into water security. It will rehab Angat Dam, the main source of drinking and irrigation water in Luzon and provide potable water to 24 Bulacan water districts to be completed this year (2019). It will tap other water sources by building dams around major river systems.
Houses for typhoon victims
After every typhoon, SMC is quick to the scene of devastation. “In Ondoy, Yolanda, Sendong, other typhoons, we were right there,” Ang points out. “We really spend good money,” he says. It is not just a one-time, perfunctory gesture of delivering cash aid or typhoon relief. “We put up thousands of houses for typhoon victims,” Ang relates.
Thus, SMC built more than 8,000 houses in Cagayan de Oro and Iligan after Typhoon Sendong.
Positive difference
As one of the Philippines’ largest corporates, SMC recognizes it has a responsibility to make a positive difference in making sure future generations have the same, if not better, opportunities than we do today.
In this regard, in 2017, SMC made two major decisions to reduce our environmental impact:
The first was cut by 50% utility and domestic water use across the entire San Miguel group by 2025.
In the two years since, SMC has managed to save some 8.8 billion liters of water, a 25.3% reduction in overall use. SMC is well ahead of the goal to reduce consumption by 20% in 2020, and is confident it will be able to reach its target.
Plastic bottle business ended
The second decision was discontinue its plastic bottled water business.
This effectively removed some 32 million plastic bottles a year, bottles which would have ended up in landfills or bodies of water, had SMC continued the business.
For SMC, sustainability is a lynchpin of its businesses, the one clarion call that motivates companies to grow and endure during this century.
Inequality
For more than nine years or for 38 consecutive quarters, the Philippines has grown continuously, in the process more than tripling the size of the economy, from $74 billion in 2001 to $320 billion in 2018, and increasing per capita income (in PPP terms) to $9,061. That phenomenal growth, one of the best in the world, however, hides an insidious truth—a stark poverty that afflicts 21% of the population (or 22.5 million Filipino), and a yawning income disparity.
San Miguel hopes to do its share to achieve redistributive social justice. Hence, its focus on three levels of security – food, water, and infrastructure.
Climate change
Meanwhile, San Miguel says addressing climate change is looking after one’s water resources and reducing one’s carbon footprint. Both are relevant to SMC’s business and have the potential to drive competitive advantage and innovation for the company.
For supply chains, SMC is partnering with farmers and backyard livestock operators to transfer technology and help raise rural incomes. Work in this area continues to evolve. SMC’s Food Group has deployed supplier engagement teams to provide training and develop skills to push sustainable and resilient supply chains.
SMC’s previous efforts in corporate social responsibility included promoting employee volunteerism, providing donations in kind, and providing grants to, or partnering with charitable organizations. We’re moving away from that model.
San Miguel’s social development and corporate giving arm, San Miguel Foundation, functions as an ideas incubator for to tackle problems like income disparity, hunger, and poverty.
San Miguel invests in its communities not only because it makes good business sense, but also because the private sector needs to do its part in solving the most pressing economic, social, and environmental challenges of our times.
SMC’s partnership with learning organizations like the School of Experiential and Entrepreneurship Development (SEED) and AHA! Learning Center, is based on the belief that everyone should have a fair shot at opportunity, and that San Miguel can contribute to a growing economy that can work for everyone, especially those who need help the most.
In San Miguel’s new vision-mission statement of 2017, sustainability emerged as an entirely new value among seven identified core values.
Commitment to sustainability is embedded in SMC’s DNA. The company has a clear set of social, economic, and environmental goals across operating businesses.
Water basic human resource
“Water is a basic human resource and a basic right. But it’s also an essential ingredient to our products and businesses. Our responsibility therefore is far greater than most,” says SMC President and COO Ang.
In 2017, SMC said it would to halve non-scarce, non-product water use by 2025.
To be sure, SMC’s water management efficiency levels are already among the highest in the Philippines. Still, SMC tries to do more, and better.
SMC achieved its a mid-term goal of 20% reduction by 2020, a full two years ahead of schedule.
In 2018, the company posted an aggregate of 25.3% reduction in water consumption, a staggering 8,841,000 cubic meters (m3) equivalent to the consumption of roughly 295,000 households. This was achieved through an integrated water management strategy that combines conservation with process water reuse, recycling, and technology.
Over 14% or about 5.1 million cubic meters is represented by the use of non-scarce resources such as sea water, rainwater, and other recycled water.
Petron water use
Petron remains the biggest user of non- scarce water. More than 29% of water used in Petron’s operations derive from alternate sources. This includes desalinated sea water at its Bataan Refinery, and rainwater harvested in most of its terminals.
In reducing their water use, Petron made the biggest contribution with a 37.55% cut in use; SMC Global Power Holdings Corp, reported a 37.31% reduction; and Northern Cement, cited 32.28% less usage over 2016 baseline figures.
In terms of volume of water saved, Petron leads the way with 6.6 million m3 saved. SMC Global Power saved 1,008,000 m3, while SMB saved 496,000 m3.
“Water for All” was a pivotal moment for San Miguel’s sustainability aspirations. It provided us the inspiration to take on other environmental issues, such as waste management.