We are constantly talking about Sustainability and ESG and the “What” of this story does not offer novelty. But, in my opinion, we still need to get alignment for action and impact.
My first pledge is about the “Why” of such business fundamentals.
Enterprises that were able to overcome obstacles in the last 20 years, have a survival instinct, otherwise they would not be in business today. So, I believe they will embrace sustainability and ESG on their own way to survive.
But if we focus attention on sustainable growth and not just survival, business owners are immediately invited to answer a few questions – What is my ambition for growth? Do I have a realistic ambition? Do I want to grow or do I want to stay small and local?
With a clear and realistic ambition in mind, business owners are in a position to make better choices concerning business and organization. Otherwise, they are just “following the crowd” and, most probably, spending money that will not generate adequate return. This is a mistake that no business owner wants to do.
My second pledge is about the “Who”.
If the objective is sustainable growth, our call to action must address Mid size enterprises and Large size ones. Those are the enterprises that have already proven they have a business case for growth, the question is how far and how quickly they can go.
Looking at the Portuguese business community that already assumes internationalization as the “route to sustainable growth”, here we have some worrying facts:
Mid and Large enterprises only represent 5% of the universe of Portuguese exporters. Being Mid and Large means a turnover of at least 10 million and 50 million euros, respectively, values that are insignificant in international trade. Saying it differently, if we look at international rankings, we just count a very few number of Portuguese enterprises in top 250 worldwide, per industry.
Another worrying fact is that 92% of Portuguese exporters are owned by national capital but only represent 60% of exports. This means that 8% of Portuguese exporters are owned by foreign capital and represent 40% of our exports.
In conclusion, Portuguese Mid and Large size enterprises must assume a sense of urgency - invest in knowledge and organizational development to speed up cycles of sustainable growth.
But we also need Small size enterprises to prove they have a business case for internationalization. According to a report issued in 2020 (Informa DB), only 11% of Portuguese enterprises are exporters. This compares with 33% in European Union and the region is behind other in the world (European Commission Internationalization of innovation in SMEs, July 2016).
My third pledge is about “How” to move on.
In Portugal, we urgently need an “acceleration engine” to envision sustainable growth. The engine is called corporate governance and we need two types of fuel:
Business owners that assume their first responsibility is to play as “Chairman”, timely and effectively - towards top management by setting ambition, values and “red lines”, and towards business partners and family by setting frameworks to avoid conflicts of interest;
And CEOs that assume their first responsibility is to promote sustainable economic growth (not just profit) in articulation with strategic stakeholders (not just shareholders), by setting targets and reporting progress with transparency, promoting transformational leadership and valuing new generations in critical functions for business innovation and organizational transformation.
When we talk about Business fundaments, it doesn’t matter the size, the point is either you have the right fuel, or not.
Have a great and impactful week!
Margarida M. Ramalho
Co-Founder and Executive Director of Católica International Business Platform
Co-Director of Academia CEO Future Ready at Católica-Lisbon Executive
Adjunct-Professor at CLSBE, International Management and Foundations of Management