Managing Asia

Managing Asia

How this billionaire family business wants to become a better corporate citizen

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Key Points
  • Alliance Global CEO Kevin Tan, son of billionaire business founder Andrew Tan, explained the conglomerate's social and environmental efforts.
  • The group aims to be carbon neutral and create 5 million jobs by 2035, a target that has been pushed back due to the pandemic.
  • Around 30% of the electricity used to make the company's Emperador brandy is produced from biogas used in the distilling process.

In this article

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How this Asian family business wants to become a better corporate citizen

A combination of a delicate natural environment and increasing poverty is encouraging the son of a billionaire business founder to improve their company's sustainable and social efforts.

Property group Alliance Global is based in the Philippines, which — being an archipelago of more than 7,000 islands — is particularly susceptible to the effects of climate change, as CEO Kevin Tan described.

"We're located in a very unique and rather precarious geographic location," Tan told CNBC's "Managing Asia: Sustainable Future."

"Every year, we experience several calamities, ranging from simple tropical depressions to typhoons to even prolonged droughts and dry spells … In recent years, we have actually seen these occurrences happen more frequently, and with a much higher ferocity," he added.

Founded by Tan's father Andrew Tan in 1993, Alliance Global operates in real estate, hospitality and food, with assets including casino and hotel complex Resorts World Manila, and the world's largest brandy distiller, Emperador. It is also the main McDonald's franchise holder in the Philippines, via its Golden Arches Development Corporation.

Alongside this, the country has a poverty problem: The World Bank estimates that there will have been 2 million more poor Filipinos in 2020 than there were in 2018 due to the coronavirus pandemic, per a June report — the country has a total population of 108 million.

And according to Tan, a shifting population is also putting pressure on resources. "(There is an) uneven sort of distribution of population growth towards the urban centers versus the rural centers of our country. And … it poses several challenges — among them is really this unequal distribution of economic opportunities," he said.

The Philippines' environmental and economic issues spurred Alliance Global to identify two goals: becoming carbon neutral by 2035 and creating 5 million jobs, either directly or indirectly, by the same date. "We decided we wanted to be … better corporate citizens," Tan said. However, the pandemic meant that the firm extended its deadline for both from 2030. "Nothing could have prepared us for this. I have to admit, yes, of course we had to step back a bit, because we were on survivor mode for the most part of last year and even until today, we've had to recalibrate our entire business model. We've had to … reduce our costs," Tan explained.

Alliance Global's Emperador is the world's largest brandy distiller.
Jay Directo | AFP | Getty Images

The firm's net income reduced by 62% year-over-year to 10.3 billion pesos ($216 million) in 2020, although several of its businesses recovered during the fourth quarter. McDonald's revenue went up 36% compared with the previous quarter, while liquor sales at Emperador rose 42% over the same period.

Making its alcohol operations more environmentally-friendly has been a focus for Alliance Global: At Emperador the firm uses biogas created from the distilling process to fuel its boilers. In turn, the boilers produce steam, which powers turbines and creates electricity. Around 30% of the company's distillery operations are powered this way, while vineyards producing grapes for its Fundador brandy in Spain use a process called deficit irrigation, where only the areas that need water are given it.

When it comes to economic development, Tan said the company's Megaworld "township" residential and office complexes are creating jobs. He singled out Iloilo, a development on the Philippines' Panay Island, where there is a focus on business process outsourcing (BPO), a practice where firms contract some of their operations to external suppliers. Such BPO companies are growing — and they need office space, Tan said. "Traditionally, the BPO sector was dominated by health care, travel, and financial services. Because of the pandemic, new industries have been introduced to outsourcing, for example logistics, technology, and e-commerce," he explained.

Alliance Global is also looking to reduce waste in its developments. "We collect all the plastics from all of our developments, from all of our communities, we put them together and … cement factories, they take this plastic and use it as fuel," Tan said.

Tan claimed the firm now looks at a "triple" bottom line. "Profitability is obviously still very important … But when we look at things now, we look at … not just having a singular bottom line, but having a triple bottom line, and that now includes, of course, environmental sustainability, as well as our social impact."