Our President’s Report on Our Sustainability Progress

“In 2019, we made significant progress, both as a growing business and as a responsible sustainability partner, particularly in areas that are most material to our ability to create stakeholder value.”

FREDERIC C. DYBUNCIO

President and CEO

Our business delivered PHP501.7 billion in revenues, representing growth of 12% over 2018 and net income growth of 20% to PHP44.6 billion. Results were strong across all three of our core businesses. Our Retail business grew revenues by 9% to PHP366.8 billion and net income by 10% to PHP12.5 billion as we opened 412 new stores, 68% of which are outside Metro Manila. Our Property group, SM Prime, posted revenue growth of 14% to PHP118.3 billion and net income growth of 18% to PHP38.1 billion. While our Banking businesses posted a 35% growth in net income to PHP44.2 billion for BDO Unibank and 24% to PHP10.1 billion for China Bank, as we rolled out branch expansion plans.

Underpinning these strong results is our integrated thinking to business sustainability: pursuing our customer-centric approach while addressing the unmet development needs of the Filipino through our core businesses – more equitable access to organized retailing for micro, small and medium enterprises (MSMEs), inclusive financial products and services, and city developments that support the national economic agenda.

This year, we continued to build integrated lifestyle cities, anchored on our mall developments that serve as hubs for us to help stimulate economic activity, and complemented by our retail and banking businesses.

Our retail business continued to develop its programs for MSMEs, engaging them in organized retailing and helping them be competitive alongside leading brands. SM Markets’ in-house brand, SM Bonus, serves as a platform for MSMEs to penetrate the retail market, with 120 of its 122 partner-suppliers being MSMEs. Moreover, we continue to bring daily grocery shopping convenience and small business opportunities into neighborhoods through our minimart format, Alfamart, which opened 228 new stores this year.

Our bank, BDO, strives to innovate to develop financial inclusion with a ground-breaking “CashAgad” program, allowing bank transactions through registered bank agents, making banking convenient for unbanked segments in the far-flung provinces of the Philippines. BDO was recognized at the Asian Banking and Finance Awards in Singapore for this breakthrough.

The country faces rapid urbanization with populations predicted to live increasingly in cities in the next 20 years. Our residential group, led by SM Development Corporation, continued to meet the demand for quality urban housing options. This is reflected in the 24% increase in our residential revenue sales, a demonstration that our model of redefining urban living spaces with larger common areas versus individual spaces, is an effective solution to meeting housing needs while ensuring a good quality of life.

With the Philippines facing an average of 20 typhoons a year, our businesses and stakeholders are at substantial risk. We have an enterprise risk management program in place and make targeted investments in building the resilience of both our businesses and our communities.

The 10% capital expenditure we allocate for disaster resilience enables our malls to continue operating during times of calamities, providing services and relief efforts to our host communities. In order to help our small and medium enterprise (SME) mall tenants also bounce back faster, SM Prime launched the SM Resilience Center in SM City Clark which serves as a data storage facility and a capacity building center. To date, 1,627 SMEs have availed of this complimentary service. On a national scale, we partnered with the National Resilience Council in its “Adopt-a-City” campaign focusing on building local government units’ capacity to mitigate climate risks.

In all our developments, we incorporate innovative urban solutions such as energy, water and waste management systems, facilities promoting mobility and smart space allocations to address the rising urbanization needs of the communities, while managing our impact on the environment.

At the center of our developments are our malls which take the lead in sustainable operation practices through the use of recycled water to meet as much as 33.6% of our requirements, proper characterization, segregation and disposal of our waste, supporting the use of environmentally friendly refrigerants for chillers and promoting renewable energy through our rooftop solar panels which have a total capacity of 9.2 MW.

Through BDO, we have also funded PHP43.4 billion in renewable energy projects through its Sustainable Finance Framework aligned with the ASEAN Green Bond Principles. These projects have a total installed capacity of 2,168 MW and provide clean energy to 1.9 million households per year.

We strive to be an employer of choice, fostering an empowering work culture where professionals can hone their skills, build fulfilling careers and find purposeful work. Aligned to the global human and labor principles of the United Nations Global Compact (UNGC), we uphold the principles of inclusion, diversity, fairness and meritocracy, serving as an equal opportunity provider. This year, we were placed among the Forbes Global 2000 – World’s Best Regarded Companies 2019 for the second consecutive year and we have also been ranked among the Forbes Global 2000 – World’s Best Employers 2019 for the third consecutive year.

This year, we turned over our 100th school building donation, the Looc Elementary School in Nasugbu, Batangas and our 160th public health center, the Butuan Medical Center in Butuan City, Mindanao. We also continued to provide college and technical-vocational scholarship grants to help the youth attain gainful employment. 

In addition, BDO Foundation launched the largest financial literacy program in the country by incorporating financial education in the Philippine public school curriculum and extending trainings to teaching and non-teaching personnel using creative teaching modules. This takes a long-term approach to effecting change in the country’s financial literacy performance, which registers below our Asian counterparts.

We strive for compliance to the ASEAN Corporate Governance Scorecard (ACGS), having ten of our companies recognized in the ACGS initiative this year.

In addition to this, we were included as part of the FTSE4Good Index Series, earning a seal of approval for our strong environmental, social and governance practices.

To further strengthen our commitment to the UN Sustainable Development Goals, we signed up as a member of the United Nations Global Compact (UNGC) and cohosted the UNGC-GRI Sustainability Summit in Manila. The summit brought together leading private and public sector agents to show best practices to build strong advocacy and action towards the national development agenda.

As our businesses continue to grow, we uphold and increasingly emphasize the principles of transparency and accountability, and work to ensure economic value creation for all our relevant stakeholders. Going forward, we will utilize our whole network – engaging our customers, suppliers and employees, capitalizing on our nationwide footprint, making targeted social investments and leveraging our brand – to drive greater impact and create meaningful long-term value for everyone we touch, in hopes of achieving a more sustainable future.