The aim is to propose the actions that a sustainable business model that could be applied in SMEs may contain, based on the socially and environmentally responsible practices of large companies that are listed on the Sustainable IPC share index in Mexico.
Summary
The objective of this non-experimental and descriptive documentary research is to analyze the annual social responsibility reports published on the internet pages of the three most profitable companies, in terms of capital gains, which are listed in the Sustainable Capital Market CPI. from Mexico. The return will be understood as the increase in the share price over the years.
The objective of the research is to promote sustainable business models, taking large companies as an example, which will lead to analyze the responsible activities they carry out and propose their replication in small and medium-sized companies, according to the ease with which they could carry out this type of socially responsible activities taking into account their size, capacity and economic power.
Keywords
Sustainability, SMEs, Profitability, Business model.
I. Statement of the problem
The business models that most companies currently follow are based on extreme consumerism, regardless of the negative environmental impact that these may have, and without taking into account the finite and non-renewable resources that planet earth has (Landazury and Ferrer 2016). In the same way, there are social paradigms that make people believe that the profitability of a company and responsible business activities are contradictory ideas, and it is very difficult to carry out the two at the same time. In this way, it seeks to demonstrate the effectiveness of sustainable business models of companies that have good profitability, reflected in the increase in the price per share in the Sustainability Index of the Mexican Stock Exchange.
II. General objective
Identify the companies that are listed in the sustainable CPI to subsequently analyze and compare them in order to identify which one has the highest profitability in the increase in the share price or capital gain, in this way it will be possible to propose a sustainable business model which will be guided by the sustainable business activities of the companies with the highest performance in said index.
III. Specific objectives
The first refers to identifying and understanding the companies listed on the Sustainable IPC.
The second refers to the graphic analysis, since in this way we will be able to know which are the companies with the highest profitability demonstrated in the increase in the share price over a 3-year time horizon.
For the third, the socially and environmentally responsible business activities of these companies will be analyzed so that a sustainable business model for SMEs with similar activities can be proposed.
IV. Theoretical framework
Sustainable development is currently a business trend and is considered a path in the management of current companies, since the different interest groups are intervening, within the scope of their roles, so that sustainable models are considered as part of the strategy of business and it is profitable (Capitán, Álvarez, Guevara & Carranco, 2019).
In the sustainable practice of companies, they have been considered from profitable points of view in internal processes up to the impact on market objectives, and these guidelines have been adopted by large companies, either due to investment needs or the demands of the markets, due to the economic profitability that sustainable measures can generate in the short and medium term, but in all cases it has been a change in thinking and a change in practice with favorable and competitive results, a change that has been subject to another type of companies, such as small and medium-sized ones (Vilchis, 2016).
Given the impact that micro, small and medium-sized companies represent in Mexico in the generation of jobs, in the environmental impact, in the volume of production and in their social interaction, it is necessary that sustainable innovation efforts consider the management of this type of organizations, designing and proposing tools with a sustainable goal. The sustainable management tools are the result of research processes with a practical and functional focus, which seek to generate the mechanisms that ensure optimal application and accurate results; They are also part of the responses that various organizations in the world have begun to generate for SMEs (Garnica, 2019).
SMEs are identified as small, medium and companies that represent a large part of the country's economy thanks to the contributions of production and distribution of goods and services (El Economista, 2015).
In recent years, these issues have been considered a priority for governments and nations. At the Summit for Sustainable Development that took place in 2015, the member states of the United Nations Organization approved the 2030 agenda, which included 17 SDGs or Sustainable Development Goals to end poverty, the inequality and injustice, as well as facing climate change. These goals are based on the Millennium Development Goals that were developed to be addressed during the period 1990 to 2015, addressing causes such as poverty and the need for development for all people. Analyzing some authors, they attribute the sustainability of companies to their organizational culture. Live in an organization, work in it,taking part in their activities and making a career is to participate intimately in their culture. This idea exemplifies what organizational culture is today (Hidalgo, García, Cubillo and Medina, 2019).
In a similar context, it is related as an organizational culture to the basic assumptions and beliefs shared by the members of an organization, operating unconsciously these principles and reflecting part of their personality and reason for being. This is why this concept has gained interest from many researchers and specialists in the subject, since it is related to each individual and each human group, and in turn, is the result of a greater cultural heritage of society. Given the above, the organizational culture must fulfill different functions such as making organizations different, generating a sense of identity, guiding behaviors towards institutional goals, facilitating the adaptation of the company to the environment, learning, change and maintaining stable internal social system (Carro, Sarmiento and Rosano 2017).
In order to propose a sustainable business model, the example of companies that have a higher profitability in the price of their shares that are listed in the Sustainability Index of the Mexican Stock Exchange will be followed.
The Sustainable CPI allows to group relevant companies whose performance has an impact in the environmental, social and corporate governance fields. In this way, they are allowed to access capital from investors concerned about problems of global interest, since these companies are known and recognized nationally and internationally for their sustainable practices (Morales and Abreu 2014).
There is concrete evidence of sustainability indices, for example: Dow Jones Sustainability Indexes, FTSE4Good Series and the Business Sustainability Index of the Brazilian Stock Exchange, thus demonstrating the effectiveness of sustainable indices. The Sustainable CPI is an appropriate parameter to recognize the best sustainability practices of companies with the aim of building a solid economy that is adequate for the purposes of the UN. In this way, the Sustainability Index allows:
- Distinguish companies for responsible investment Be a tool for the investigation and analysis of responsible companies Be an object of reference and comparison with other companies Identify areas of opportunity in matters of sustainability and business Motivate companies to commit to sustainability.Identify sustainable and responsible companies with higher economic profitability.
In this way, companies whose share price is favored over the years after the implementation of sustainable actions can be analyzed (Aguiñiga and Badiola 2012).
V. Methodology
The characteristics with which this research was designed are presented below (Table I).
Table I. Research design
Source: self made
The process established to carry out this investigation in order to achieve the proposed objective was developed through five stages:
The first was to identify the 30 companies listed on the Sustainable CPI on the Mexican Stock Exchange shown in Table II, through the official website of the Mexican Stock Exchange (Grupo BMV, 2019).
Table II. Companies listed on the Sustainable IPC
Source: self made
The second step was to analyze the 30 companies that have been mentioned in the previous table using the S&P Capital IQ (2019) tool that is used to compare the price per share of companies over time from the creation of the Sustainable CPI. in 2016. In this way, the three most profitable companies in capital gain belonging to this index were identified.
The next step consisted of investigating the social and environmental responsibility reports of the three most profitable companies belonging to the Sustainable IPC, which turned out to be: Elektra, Walmart de México and Qualitas.
Subsequently, the next step was to propose responsible and sustainable activities to small and medium-sized companies, based on the activities of the three companies with the highest profitability in the price per share in the Sustainable CPI.
SAW. Results obtained
The results of applying the methodology of this research are summarized below (Graph 1)
Graph I. Analysis and comparison of the companies listed in the Sustainable CPI
Source: Own elaboration with the S&P Capital IQ tool based on the share prices of the companies belonging to the Sustainable CPI from 2016 to September 2019.
Graph I shows the 30 companies listed on the Sustainable CPI, which shows their price per share from October 2016 to September 2019, which is the extent to which this study covers. The companies with the highest performance in the share price during the period 2016 to 2019 were identified as: Qualitas with 62.05%, Walmart de México with 28.45% and Elektra with 106.13%.
Next, the social and environmental responsibility reports of the three most profitable companies belonging to the index were investigated, which turned out to be; Grupo Elektra (2018) Walmart de México (Walmart, 2018) and Qualitas (Qualitas, 2018), summarizing the results in Table III.
Table III. Identification of responsible business activities
The activities listed above in Table III refer to certain specific actions, so each activity will be adapted to the industry, business, or business model in which you want to replicate these activities.
The actions that can be performed are described below.
GHG emissions reduction
Greenhouse gases are those gases that accumulate in the Earth's atmosphere and that are capable of absorbing infrared radiation from the Sun, increasing and retaining heat in the atmosphere. That is, they are those gases present in the atmosphere that give rise to the greenhouse effect. For the reduction of these gases, the main activities carried out are the reduction of non-electric means of transport and machinery, reduction in livestock consumption, avoiding cutting down trees, concern about waste management, and reduction in the use of chemicals or substances that affect the environment (OCEANA, 2015).
Energy intensity reduction
It refers to the responsible use of energy using it when it is really necessary. Find renewable energy sources. This also involves using electrical systems and appliances that are energy saving.
Waste reduction
Generate the least amount of garbage and if it is generated, find that it can be recycled.Reduction of food: That the food produced is necessary for its consumption, in this way there will be no waste of food, which means a minor exploitation of the waste industry. the food.
Combat deforestation
Avoid cutting down trees at all costs and if possible contribute to organizations dedicated to reforestation.
Food donation
Donations can be made directly from food or money to buy food for people in poverty.
Compost production
Using organic waste. This activity seeks to create a compost that will serve as fertilizer for areas that need it.
Investment in renewable energy
Invest in infrastructure to replace energy such as electricity or gasoline and its derivatives, in renewable energy plants. Similarly, you can invest in research in the same field.
Reduction of water use
Responsible use of water, creating facilities that favor water saving, as well as finding and repairing water leaks.
Sewage treatment
Create facilities to reuse water that is contaminated or that its state is not suitable for the consumption of living beings.
Accident prevention
Create a safe work environment for all collaborators by counting on efficient security systems, constantly teaching courses on safety in the workplace, preventive measures, adequate safety equipment, signs, and having highly trained personnel.
Support to NGOs
Support for social organizations seeking to combat a social, environmental or political issue of interest to the company. The support can be financial, with human capital, with training, and with the provision of facilities or machinery.
Support to communities
Encourage local consumption where the company is located; likewise, create opportunities for nearby communities; to be a growth driver and not simply to be a resource and competition exploiter. This requires turning neighboring communities into suppliers.
Anti-corruption
Have a business model where corruption does not exist, where jobs are given by skills, where workers are not extorted, and where all processes are transparent.
Gender equality
Create the same opportunities for men and women. Equitably respect the rights and obligations of all.
Zero tolerance for sexual abuse
Have strict policies against sexual abuse and harassment. Do not allow any of these activities to exist on any level.
Inclusion
Create job opportunities for people in a vulnerable state. This also refers to being inclusive of all people with disabilities, creating social programs and not tolerating any type of racism and discrimination.
Generational commitment
Create job opportunities open to all generations without falling into child labor. Likewise, be aware of the next generations, respecting natural resources and leaving them a world without environmental, social or political problems.
Decent job
Respect labor rights, hours of work, fair wages, and gender equality.
Harassment prevention
Have strict policies against any type of harassment.
Employee health care
Encourage the health care of all company collaborators, through nutritional programs, incentive a time to exercise, as well as through medical check-ups. In the same way, this implies teaching courses or training everyone on the development of a responsible road culture.
No child labor
Do not allow child labor and exploitation of children in the company. Similarly, organizations can be supported to help combat this social problem.
Support in natural disasters
Have a fund directly intended to help in the event of a natural disaster. Similarly, you can help by donating in the event of such an event.
Education activities
Promote and support activities that seek education and combat illiteracy.
Financial growth
Seek the financial growth of both employees of the company. This implies the creation of jobs and actions for the growth of the country, following all the guidelines stipulated by the government.
Responsible and sustainable activities for small and medium-sized companies are identified and suggested below based on the activities of the three companies with the highest profitability in the Sustainable CPI (Table IV).
Table IV. Recommendation of responsible activities for SMEs
Source: self made
The activities that are recommended to small and medium-sized companies are based on the ease of replication or adaptation to the business, since they do not require financial investment or it is very low, in the same way it may be that they require specific facilities that SMEs could not to have.
The activities shown in Table IV are proposed because in this way companies that want to join in to carry out responsible activities can do so without the need to make major changes in the way they operate, in this way their business model will become sustainable and more attractive.
Another benefit of carrying out this type of responsible action can be seen in savings, for example, if you choose to take an action for water care consisting of the option of implementing a water purifier, it can result in savings in materials premiums and at the same time develop a socially responsible action. Consequently, these types of activities must be adapted and perfected so that they work according to the business where they want to apply.
VII. Conclusions and discussion of the results
The results obtained allow us to conclude that:
- Most of the companies listed in the Sustainable CPI carry out responsible environmental and social activities. There are different types of responsible activities that companies can carry out. There are responsible activities that are recommended to be replicated in small and medium-sized companies, as these do not require investment. of financial magnitude. The fulfillment of one or more responsible activities creates a sustainable, attractive and profitable business model in companies. Currently, there are an increasing number of companies that care about the environment and social issues, this It can be seen reflected in the performance of the shares that belong to the Sustainable CPI of the capital market in Mexico.The increase in the price per share of the majority of the companies that carry out this type of responsible practices was verified. Despite the fact that Walmex is the company that carries out more responsible activities and that belongs to the Sustainable CPI, Elektra has higher profits in Mexico and this allows us to infer that Walmex's plans are likely to be focused on the distant future, where sustainability is one of its main attractions for investors, thus placing it in a stage of development and growth. Companies identified with the best returns in terms of capital gains on their share prices can be replicated by small and medium-sized companies. Although there are some activities that SMEs could not carry out,such as the creation of power plants or heavy investments in renewable energy, there are other activities with greater possibility of application, such as strategies to promote labor equity, decent work, concern for waste and residues, and concern for the health of its employees, Strategies that can be applied in SMEs without the need for a significant investment. Environmental and social responsibility can be an attraction for new investors who are concerned about this type of issue, as has been shown in Graph I, which shows performance in the price of the shares of the companies listed in the Sustainable CPI. Each of the activities carried out in the three companies analyzed given that they recorded the best capital gains in the sustainable CPI,They are applied and adapted to your industry and business, so they can be replicated in different types of businesses and industries, including small and medium-sized companies.
This was an investigation focused on the three companies with the best performance in their share prices and that are part of the Sustainable CPI. In this way, this research is intended to add to the theoretical knowledge that serves as a basis or example to encourage the design of sustainable business models, so that large companies and mainly SMEs replicate, adapt and / or implement the activities of responsibility social and environmental that large companies are developing.
Through this research it can be shown that profitability and responsibility are not opposing subjects. The analysis developed in this research is limited only to the country of Mexico, so it is recommended to apply the methodology used in this document to analyze other countries.
VIII. References
- Aguiñiga, D., & Badiola, R. (2012). Sustainability Index of the Mexican Stock Exchange. Retrieved October 4, 2019, from http://www.earthgonomic.org/biblioteca/2012_DELOITTE_Indice_sustentabilidad_BMV.pdfCapitán, ALH, Álvarez, SG, Guevara, APC, & Carranco, NM (2019). The Goals of Good Living. An alternative proposal to the Sustainable Development Goals. Iberoamerican Journal of Development Studies = Iberoamerican Journal of Development Studies, 8 (1), 6-57.Carro-Suárez, J., Sarmiento-Paredes, S., & Rosano-Ortega, G. (2017). Organizational culture and its influence on business sustainability. The importance of culture in business sustainability. Management Studies, 33 (145), 352-365.The Economist (2015). Small and medium-sized companies, fundamental for the development of the economy.Retrieved September 4, 2019, https://www.eleconomista.com.mx/opinion/Pequenas-y-medianas-empresas-fundamentales-para-el-desarrollo-de-la-economia-20180315-0156.htmlGarnica, AG (2019). Small and Medium Enterprises (SMEs) in the context of Open Innovation: a theoretical synthesis. TEUKEN BIDIKAY. Latin American Journal of Research in Organizations, Environment and Society, 10 (14), 101-120. BMV Group. (2019). Types of BMV Indices. Retrieved on November 5, 2019, from https://www.bmv.com.mx/es/Grupo_BMV/Tipos_de_indices/IPC%20SUSTENTABLE-445Grupo Elektra. (2018). Growing with you: Sustainability Report 2018. Retrieved on October 12, 2019, from http://www.grupoelektra.com.mx/Documents/ES/Downloads/Informe-de-Sustentabilidad-Grupo-Elektra-2018_ES.pdfHidalgo, AL, García, S., Cubillo, A. & Medina, N.(2019) The Good Living Objectives as an alternative global agenda for international cooperation for Good Living. A decolonial, post-capitalist and biocentric proposal. Iberoamerican Journal of Development Studies Landazury Villalba, LF, & Ferrer Manotas, F. (2016). Innovation as a Transversal Axis in Organizational Business Models. EAN Magazine, (81), 129-148, Morales Castro, JA, & Abreu Beristain, M. (2014). Analysis of the working capital of sustainable companies listed on the IPC of the Mexican stock exchange. Syllogism Research Magazine, 1 (13), 52-67.OCEANA. (2015). Greenhouse gases. Retrieved on November 5, 2019, from https://eu.oceana.org/es/node/46897Qualitas. (2018). Tracing new routes: Integrated Annual Report 2018. Retrieved on October 14, 2019, from http://qinversionistas.qualitas.com.mx/portal/wp-content/uploads/IA_Qualitas-2018_18.pdfS&P Capital IQ. (2019).. Recovered on October 1, 2019 from:
www.capitaliq.com/Vilchis, FL (2016). Social responsibility and corporate sustainability factors in Mexico. Universidad & Empresa, 18 (31), 103-119.Walmart de México (2018). Walmart: Corporate Responsibility. Retrieved on October 14, 2019, from
JEL
Q01, Q50, Q56
Abstract
The objective of this documentary research, not experimental and descriptive research, is to analyze the annual social responsibility reports published on the internet pages of the three most profitable companies listed on the Mexican Stock Exchange Sustainable Index. Profitability in this paper is understood as the increase in the price per share over the years. The objective of the research is to promote sustainable business models, taking as a guide the practices in large companies, which will lead to analyze the responsible activities that they carry out, and propose their application in small and medium businesses in order to perform socially responsible activities, taking into account their size, capacity and economic power.
Keywords
Sustainability, SMEs, Profitability, Business model.
