Wednesday, 16 October 2024
Alfik – Annisa
Moderator: Mr Arviansyah, Ph.D.
Speaker: Prof Amin Wibowo, Ph.D.
GNAM Week Universitas Indonesia 3rd Day, 1st session
Crafting a Digital Strategy to Create a Sustainable Business Environment
We started the registration of all participants at 15:40 at UGM Yogyakarta. The event began at 16:23, with Dr. Arviansyah, as the moderator, introducing the profile of Prof. Amin Wibowo, Ph.D., who is the Head of the MM program at UGM Yogyakarta. Prof. Amin then began his presentation on “Digital Transformation for Sustainability: Crafting a Digital Strategy to Create a Sustainable Business.” He first posed questions to the audience about climate change, such as comparing the temperature during the Ice Age to now and discussing current global emissions. He also quoted Milton Friedman, an economist and Nobel laureate, who popularized the view that “the only purpose of business is to gain profit.”
He described a case involving a hypothetical corporate “serial game killer.” The concept involves imagining a scenario where an outsider (the “serial killer”) buys the company and systematically destroys its brand, services, and products while keeping the employees. This exercise prompts leaders to consider which aspects of the company they would fight to protect and why, helping them clarify what truly defines the organization. This method encourages introspection about the company’s enduring values and mission, beyond just its profits or products. By asking questions like which product lines should be cut or which leaders might be dispensable, the game helps identify the most critical elements for long-term survival and success, aligning with the company’s core ideology.
He also mentioned the book “Reimagining Capitalism,” which argues that capitalism is on the verge of destroying the planet and destabilizing society as wealth rushes to the top, thus necessitating criticism and reform. One action that business owners should take is to increase the price of fuel so that it exceeds the cost of the negative externalities caused by gasoline production.
Reimagining capitalism involves rethinking the traditional capitalist system to address social and environmental challenges alongside profit-making. In this context, three key forms of capital are central to these discussions: grant capital, social finance, and commercial capital. Each of these plays a distinct role in shaping a more inclusive, equitable, and sustainable economic system.
Grant Capital
Grant capital refers to funds provided, usually by governments, philanthropists, or non-profits, with no expectation of financial return. It is typically directed toward projects that deliver social or environmental impact but lack commercial viability. These grants often target areas like poverty alleviation, climate action, or social services where the returns are non-financial but deeply impactful. Since there’s no requirement for a financial return, grant capital can be highly flexible and innovative in supporting experimental or high-risk initiatives that may later pave the way for more scalable solutions. For example, many early-stage social enterprises rely on grant funding to test and refine their models before they can attract more traditional investment.
Social Finance
Social finance is a hybrid approach that blends financial returns with social or environmental goals. It includes impact investing, where investors seek both a financial return and a measurable social or environmental impact. Unlike grant capital, social finance expects some level of return, though typically lower than traditional commercial investments. This form of finance plays a crucial role in scaling up social enterprises or sustainable projects that have proven their viability but need additional capital to grow. Tools like social bonds, green bonds, and venture philanthropy fall under this category, where investors are often willing to accept lower returns for the sake of contributing to societal well-being. An example of social finance is impact investing, where firms or individuals invest in businesses that aim to generate measurable social benefits-such as clean energy, affordable housing, or education, while also providing financial returns.
Commercial Capital
Commercial capital represents the traditional form of investment, where the primary focus is maximizing financial returns for investors. In a reimagined capitalist model, commercial capital is increasingly pressured to incorporate principles of Environmental, Social, and Governance (ESG) into decision-making. While historically focused solely on profit, modern commercial investors are now more aware of how sustainability and ethical practices can enhance long-term profitability and risk management. Thus, companies that prioritize sustainable practices may find themselves more attractive to commercial investors, as these practices align with emerging market preferences and regulatory demands. A reimagined capitalist system encourages collaboration among these three types of capital. For instance, grant capital can help de-risk early-stage ventures, making them more attractive to social finance. Once a model is proven, social finance can help scale the initiative, eventually attracting commercial capital to further expand operations. This multi-tiered approach allows for more comprehensive solutions to social and environmental problems, driving a shift from pure profit maximization toward creating shared value for society.
The urgency to reimagine capitalism is increasing due to the COVID-19 pandemic, the energy and climate crisis, and political instability. It’s important for any business to adopt a triple bottom-line approach (People, Planet, Profit) to balance economic progression, environmental stewardship, and social responsibility. Business owners in Indonesia can also adapt technology to make their businesses sustainable, as more Indonesians are using the internet and social media.
Prof. Amin illustrated the development of the banking industry, evolving from fully offline branches to ATMs and mobile banking as a result of technology. He also explained why BRI invested in its satellite to improve internet connectivity and facilitate hassle-free transactions for its customers. He believes that digital transformation can be applied across all Indonesian industries, not just banking, to become more environmentally conscious and sustainable in addition to being more profitable.
Question:
- Is it possible to make economic growth along with sustainability?
- How can Gen Z change their mindset from capitalism to a more sustainable view?
- Which aspect of 3P is more important than others?
- How can we utilize technology if technology itself can damage the environment?
- Is it ethical if we accept our company leader’s or employer’s request to replace manpower in our workplace with technology?
