Different contexts require different approaches – and my recent research highlights that leading Latin American companies think fundamentally differently about human resource management (HRM) to the traditional HRM approaches. Specifically, the HRM models identified in Latin America frequently include all stakeholders involved or affected by the employment relationship. This means that companies think about their workers in a comprehensive way, especially when operating in more disadvantaged communities, and consequently they are developing different types of employment relationships.

While in Latin America, as everywhere, HRM practices differ across countries, organizations and industries, the best performing companies in the region have understood the complexity of the local labour markets and are configuring their HRM systems around key stakeholders – the local employees, their families and relevant community members. These successful HRM systems have proven to be responsive to worker and other related stakeholders’ expectations.

Take the example of ALFA, an emblematic Mexican diversified business group, whose sustainability philosophy is based on a permanent commitment to develop their employees, their families and their communities, while also seeking to harmonize its productive operations with the natural environment. ALFA’s HRM programs are extended to the families of its employees through educational and health prevention initiatives. The company offers a scholarship program for the children of its employees and organizes health fairs targeting the community, employees and their family’s needs. Further, ALFA emphasizes a policy to keep as much as possible of the current workforce of any company it acquires. Even when ALFA has increased its operations internationally, it tends to carry on its community-oriented and paternalistic management style when it goes abroad. For instance, in Nemak Brazil (a subsidiary of ALFA - auto parts) the program “Crecer” (To Grow) offers professional orientation to 100 young people, mainly children of the employees, through workshops and outdoor activities.

Labour relationships in the region, a core issue for human resource managers, is based on unions and freedom of association for employees. These labour relationships are commonly formalized through collective bargaining agreements, and close and constant communication with unions is a key factor in maintaining a healthy liaison. In Brazilian MARFRIG (food), all administrative and operational employees are covered by collective bargaining agreements, in accordance with the local legislation. MARFRIG organizes formal meetings of trade union federations with union representatives to discuss important topics related to the company and to employees’ well-being. Thus, respect for labour rights within the company and across the company’s supply chain is at the center of HRM policies and follow the principles of decent work promoted by United Nations Global Compact.

HRM systems not only extend benefits for employees’ families, but also include initiatives that involve employees in the company’s social strategy. The initiatives that target members of the local community consist mostly of educational programs either for job training or for self-employment in which employees participate as volunteers. For example, Argentinian energy firm IMPSA offers open academic training programs to the entire community in which it is located. Other companies offer specialized, high-level training, as does ARAUCO’s first Training and Education Center for Forestry Workers in the Quirihue commune of Chile’s Bío Bío region. Peruvian ALICORP (food) has a volunteer program called Los Niños de ALICORP [The Kids of ALICORP] that provides nutrition workshops that benefit pregnant mothers with children under five years old. These workshops are taught by volunteer employees. In Mexican beverages company FEMSA, employees have the opportunity to participate in Prep@Net as online tutors for people who are completing their high school-level studies. Volunteers of the Colombian business NUTRESA (food) help in the knowledge transfer of manufacturing practices through The National Association of Food Banks of Colombia. Qualifying teams that work in these communities facilitate compliance with national legislation and contribute to the sustainability of efforts to eradicate hunger.

These examples suggest that the role of human resource departments is crucial when national and local governmental agencies or other organizations are unable or lack the resources to provide for the physical or educational infrastructure for business competitiveness, producing institutional voids that companies need to compensate. Thus, it seems that leading local companies have a social embeddedness capability that makes them well-placed to perform basic institutional functions that support their economic growth through their HRM systems.

Therefore, attending to the broad employment relationship becomes much more important than has traditionally been recognized in HRM practice.

Three themes support Latin American HRM models through the stakeholder perspective:

 - investment in employee personal and technical development

 - cooperative labor relationships;

 - and community-oriented CSR activities conducted through employees.

For managers wishing to design successful HRM systems, this stakeholder approach offers valuable guidance regarding identification of relevant social stakeholders. The recommendation for multinational enterprises that operate in the region is to become responsive in their host countries and engaged with their local stakeholders targeting the human development dimension of their employees, their families and members of the local community.

Originally published in IEDP-Developing Leaders.

CSR has to be about ethical principles that reduce negative impacts of all kinds but too often it is reduced to a box-ticking exercise across internationally accepted standards that may not address specific local issues, with the result that negative impacts persist.

Global CSR frameworks are not sufficient in themselves, because so many social issues and sustainable questions are specifically local. Executives therefore need to think more carefully about being ‘good neighbours’ as well as being concerned ‘global citizens’. Historically Mexico has had a strong history of corporate paternalism with family firms taking a long-term, stewarding approach to the business and its employees. This abruptly ended with the entrance of Mexico into the North American Free Trade Agreement in 1994. The traditional corporate paternalism has gradually been dismantled in favour of a newer global CSR approach, in part because the box-ticking is less expensive than the corporate paternalism that involved everything from company-sponsored clinics to housing and recreational activities.

Large Mexican businesses have been enthusiastic embracers of CSR in recent years. The Mexican Center for Philanthropy (CEMEFI) now recognizes hundreds of companies that engage in CSR practice that meet certain minimal standards. The Mexican business magazine, Expansion, has for three years surveyed CSR practice among its list of Expansion 500 companies and recognizes top CSR performers. In fact, CSR has become a required course in many undergraduate business programs and a topic for addresses to university graduates.

So, what is wrong with this picture? On the one hand, it is a great thing that Mexican companies have become so involved in CSR. Yet, amazingly, as one looks more closely at the nature of the discussion and the way that CSR is being practiced, it seems as though CSR is mostly an imported concept. In the surveys and rankings, the requisite questions on gender diversity, ethics code, charitable contributions, employee voluntarism, use of renewable energy, and recycling, all appear. Yet the local contours of social responsibility are often forgotten.

Take the issue of discrimination. Many corporate social reports comply with standards established by the Global Reporting Initiative (GRI). GRI 405-1 asks about gender, age group and other minority or vulnerable groups. Whether a company reports on minority groups is up to the firm. In its 2014 sustainability report, Cemex, the multinational building materials company, disclosed that it had no violations of human rights of indigenous peoples; while, Femsa, a multinational retail and beverage company, did not even mention the issue in its 2014 report. Yet both of these companies are located in the Mexican city of Monterey, where people most discriminate against indigenous people![1]

CSR and disclosure are largely driven by a global CSR agenda where there is little attention paid to local issues. There are many kinds of discrimination that are routinely practiced in Mexico, and routinely ignored as an issue by firms, except for gender. For example, employees and job candidates are routinely discriminated against based on age, pregnancy, testing positive for diabetes, having tattoos, or ethnic background.

Discrimination is not the only problematic area. Under Mexican law, private firms are required to participate in a profit sharing plan whereby ten percent of profits are shared with full-time employees, whatever their level in the firm. Companies routinely create other companies in ways so as to isolate employees in companies with zero profits so as to avoid profit sharing.

In the case of local issues, the Mexican social landscape has a unique shape, based on the country’s history, especially since the Mexican Revolution (1910-1920). Certainly, Mexico is influenced by global tendencies, but the contours of its approach to CSR need to take into account its own special circumstances and history, which are often forgotten by companies.

This is not to say that climate change and women’s rights are not important issues in Mexico. Of course, they are. But political risk is driven by local issues, not global issues.  The reluctance to share profits with employees increases income inequality and most likely the perception that the system only benefits the rich, rather than the poor and middle class. Addressed properly Mexican firms could reduce popular discontent and stand out on the world stage for their willingness to implement a unique approach to sharing the wealth.

So how can companies meet the challenge of being good neighbors as well as global corporate citizens? Executives should begin by identifying the expectations that people have of firms locally at the level of their city, state or province, or nation.  Managers need to ask whether there is some way to create a business case for local CSR initiatives. They can then identify other firms with whom they can collaborate to respond to local issues. Finally, companies can identify partners within government and the social sector that can help mobilize resources to correct problems.

Take the case of discrimination against indigenous peoples. Fostering positive attitudes and practices has to be the job of many actors working together in government, civil society, as well as business. Working together on local problems is what being a good neighbour is all about.

[1] Campos Garza, L. 2014. Monterrey, la ciudad que más discrimina en el país: Conapred. Proceso. Accessed by internet on November 3, 2016 at http://www.proceso.com.mx/379343/monterrey-la-ciudad-que-mas-discrimina-en-el-pais-conapred.

*Originally published in IEDP-Developing Leaders.

The issue of sustainability has captured the attention of the media, of governments and of a growing number of executives who trumpet the sustainability initiatives of their companies. For many people, however, sustainability is seen as another feel-good catchword for the save-the-planet types. In the business world, most employees are unimpressed by declarations from the C-Suite on the importance of sustainability. For these employees, the noise around sustainability is an attempt to jump on the corporate social responsibility bandwagon. They fail to see the relevance of sustainability to the success of their companies — and they see even less relevance in their own day-to-day jobs.

One business school centre is trying to change this mindset through an innovative online training program that not only makes the business case for sustainability — how it impacts a company’s results — but also links sustainability to the success of every function within a company. Whether they come from marketing, human resources, operations or any other major function of a business, participants learn how sustainability applies directly to them.

The creator of this online program is SUSTENTUS, a centre for corporate sustainability and social entrepreneurship at the EGADE Business School in Monterrey, Mexico. EGADE, which is affiliated with the Monterrey Institute of Technology and Higher Education (ITESM), has been a pioneer of CSR and, more recently, sustainability initiatives for the past 16 years. Its SUSTENTUS centre, launched in 2009 with major sponsorship from Mexico’s Femsa Corporation, has a variety of programs and activities — from research to consulting to executive training — designed to advance knowledge about sustainability and corporate social responsibility.

The online program, called Creating a Culture of Sustainability, was launched in July 2015. SUSTENTUS had been working on the program for two years prior to the launch. The idea for the new program emerged from the many corporate connections of the centre. The leaders of SUSTENTUS — including founder Gerardo Lozano, who brought corporate social responsibility studies to EGADE when he arrived in 2001 — saw in many companies a gap in terms of sustainability training. With further research, Lozano and his team determined that most sustainability managers did not have the resources or capabilities to train thousands of employees in sustainability — especially when most of those employees were not convinced that sustainability was even an important issue.

Overcoming Misconceptions

The ambitious goal of Creating a Culture of Sustainability — which costs from $1400 to $2200 Mexican pesos ($75 to $120 USD) per employee depending on whether the company enrols 30, 60, or 120 people — is to help employees develop specific ideas for how they can apply the principles and goals of sustainability to their jobs. The first step in the program, however, is to overcome the misconceptions and resistance about sustainability that continues to plague the issue. This is no easy task.

As Francisco Layrisse, research and project coordinator for SUSTENTUS, explains, “Sustainability is still a very new area of expertise. It’s been getting a lot of attention because of climate change and environmental issues that have been coming up recently in the news and in the world agenda.” However, he notes, “there is still a lot of misconceptions in terms of what sustainability is and what good it can do to the company. Too many people still think sustainability is something environmentalist fanatics are trying to push forward to save trees and wildlife and so on.”

Horacio Martínez Reyes, sustainability manager at Mexican multinational Alfa Group, notes that even when a company has a culture of sustainability in place, many industrial managers do not realize that their practices are sustainability-related. “People don’t know that what they do benefits sustainability,” he explains. “When we tell them they have to measure this or that, they say, ‘we’ve been doing that for years. You want to call it sustainability, fine, we’ll call it sustainability.’” Along with Femsa, Alfa is one of the highest profile companies to have participated in the course to date.

The goal of the Creating a Culture of Sustainability program, explains SUSTENTUS founder Lozano, is to show that sustainability is not about saving the environment but incorporating new social and environmental variables in your decision thinking processes, which in the medium and long term benefits companies as well as society. Sustainability in this context refers to avoiding causing long-term damage in the interest of acquiring short-term profits.

For Danone subsidiary Bonafont, the number one Mexican bottled water company and an early participant in the course, this responsibility translates into a strategy based on ‘cycles’ rather than the traditional linear approach. As Sofía Díaz Rivera, who leads the company’s plastics cycle function in Mexico, explains: “We need to change the mindset from ‘okay, you’re in a linear economy, you buy, you produce and then you discard,’ into ‘how we can make use again of these things that are discarded and use them again as materials.’” Bonafont sent 30 people to the course as a trial run, and given the positive results, Díaz Rivera hopes more Bonafont employees will be taking the course in the future.

From General to Specific: A Two-Part Structure

To dispel misconceptions and to teach the short- and long-term impact of sustainability, both financial and societal, the seven-hour online course is divided into two parts or ‘modules’: a four-hour introductory module, followed by three-hour modules by ‘profile’.

The introductory module consists of 26 capsules — on average, about eight minutes each — during which participants learn the principles and concepts of sustainability. One capsule, for example, explains the difference between sustainability and corporate social responsibility. As Layrisse explains, “CSR is more simply about the company doing good. Corporate sustainability is a more evolved way of looking at how businesses connect to society and to the environment, while making money, of course.”

Other capsules in the introductory module cover such areas as business ethics, internal and external communication and ISO 26000, the international standard of social responsibility quality.

One very important component of the introductory module, introduced in a two-part capsule, is making the business case for sustainability — a challenge given the difficulty in monetizing its benefits. The returns on sustainability initiatives are more intangible, and determining how to put a dollar value on such intangibles is still a work in progress.

Although developing the business case for sustainability is important, perhaps the most fundamental of the takeaways from the first module is an understanding of the three core principles of sustainability: economic profit, respect toward society and respect to the environment. These guiding principles, which can be synthesized as the three P’s of People, Planet and Profit, capture and summarize the scope and ambition of the sustainability concept.

In the second part of the program, participants are divided into groups based on their functions, including human resources, operations, marketing, supply chain management and finance. Through the 16 capsules of this part of the program, participants can more fully appreciate the specific implications of sustainability on their jobs.

In the operations module, for example, the four major themes are the efficient use of resources and energy, production and distribution, cleaning, waste management and recycling, and environmental care. Discussions in this module thus centre on such topics as greenhouse gases, inventory and lean manufacturing.

The four themes for the human resources module, to take another example, are work and work relations, social dialogue, working conditions and social protection, and worker safety and security. Discussions in this module focus on issues such as discrimination, human rights, and inclusiveness of people with disabilities.

“I like that the course has a different profile for each function in the company,” says Bonafont’s Díaz Rivera. “People can say, ‘What do I need to do in my actual job? How can
I help?’”

Frameworks for Proposals

One vital element of the modules by profile is that participants are required to construct a basic idea on how they will incorporate sustainability within their work. Specifically, participants at the end of the training must develop what SUSTENTUS calls the “framework of a proposal.” This framework of a proposal is more developed than just an idea but is not a full project proposal, which would require many more hours than available in the course.

In the marketing module, for example, one Alfa participant developed a project to specifically incorporate sustainability benefits in its marketing campaigns. Traditionally, Martínez explains, the sale of products such as styrene foam materials is driven by price; no effort is made to emphasize the reduction in energy consumption made posible through the use of the foam insulation. Future marketing campaigns, according to this proposal, will describe exactly how much consumers will save on their energy bills if they use the Alfa material.

Another Alfa proposal to emerge from the course — this one related to the HR module proposals — was to launch a day care center at the corporate level for the children of employees.

Similarly specific proposals emerged from Bonafont’s participation, according to Díaz Rivera. For example, a Bonafont participant in charge of innovation project management at the company developed requirements for sustainability indicators to be included in all project proposals. Another participant, in charge of Bonafont’s fleet of delivery vehicles, developed a proposal to recycle the batteries of the company’s vehicles.

The bottom-line lesson in this second phase of the program is that sustainability is not the responsibility of a specific department. It is the responsibility of each and every individual of the company. Only with each and every individual collaborating to build a culture of sustainability can a company evolve, becoming much more efficient and longer-lasting. As Díaz Rivera explains, “As in many companies, there are a few people who are in charge of sustainability, but you need the whole company engaged to really make a change.”

Alfa’s participation reflected this effort to engage people from across the corporation. In addition to the 24 members of the company’s sustainability committee — a corporatewide committee that meets quarterly to discuss sustainability issues — participants also included a number of other key decision makers in the group whom committee members thought would benefit from the course. As a result, Alfa participants sampled every different functional module offered in the program.

Marketing Challenges — and a Vision for the Future

A program that takes a total of seven hours will necessarily be an overview of the topic, especially at the functional level. Eventually, SUSTENTUS’ long-term vision for this course is to enable participants to deepen their sustainability expertise in the areas that they choose themselves.

For example, an operations employee in the course today takes four hours of introductory
training followed by three hours of training more focused on the operations function. As mentioned above, this training covers a variety of technical issues, such greenhouse gases and waste management. Since there are only three hours to cover all of the various issues, the training is necessarily superficial. In the long term, perhaps three to five years from now, the Creating a Culture of Sustainability program would offer perhaps three to four hours dedicated to greenhouse gases alone, for example, or waste management or LCA (life cycle assessments).

This is the long-term vision. In the meantime, the company will continue to reach out to companies who want to change their employees’ mindset about sustainability. It is not always an easy sale. SUSTENTUS must compete for a share of human resources training budgets against competitors offering courses on issues such as leadership or quality — areas that offer a tangible return on investment. Because SUSTENTUS can hardly guarantee that sales will immediately increase upon completion of the course, decisionmakers often turn to other safer investments.

This is the challenge of marketing sustainability, says Layrisse. “If you work in finance, in marketing or in human resources, nobody is going to tell you that your work is not valuable within the company,” he says. For training decision-makers, the need for trained marketing or human resources or financing personnel is a fact. The same cannot be said for sustainability.

Alfa’s Martínez agrees. “It’s a tough sell because unlike other projects, there is no tangible ROI,” he says. For example, you can’t say that this course will be paid back in three years or, he continues, “this course will make my income x percent bigger.”

Despite the challenges, Layrisse remains cautiously optimistic about the future of the course and the future of sustainability in general. There is more awareness than ever before, especially among the younger generations, of the impact of business activities on the planet and on society.

“Take a look at the business schools,” Layrisse says. Ten years ago, courses on environment or ethics or society were non-existent in the curriculum of many of the top business schools — or if they existed they were always optional. “I do not have the exact data for 2016, but I am certain that the top business schools all include courses related to sustainability, CSR, ethics, business and society, or corporate citizenship. The terms may be different but we’re all practically talking about the same thing.”

After the worldwide shock brought on by the Brexit, the election of Donald Trump confirms many of the fears that a new, uncertain world order is in store. As I warned in a previous article on the effects of the Brexit, these election trends toward populism and xenophobia place the building of a more-open, more-egalitarian global society at risk and show that the world is headed toward more fragmentation. Precisely when the world economy is so fragile, a return to protectionism and economic nationalism could mean practically irreversible high costs that could undo decades of integration and cooperation among nations.

The main concern is that policies such as protectionism, immigration reduction, and rejection of climate-change agreements, among others, will have a huge impact on the world economy, especially in emerging economies, whose growth and development depend greatly on trade, foreign investment, environmental action, and immigration permeability. 

For now, Trump’s policies—unpredictable and undefined until he is sworn in in January 2017—have unleashed high market volatility. Mexico is especially affected by the uncertainty regarding measures that affect us directly, such as a revision of or withdrawal from the North American Free Trade Agreement (NAFTA), the deportation of millions of undocumented workers, taxing or confiscation of migrant remittances, and the construction of the famous wall. 

One of the first effects of the volatility can be seen in the plunging value of the peso against the dollar, which during the week of the election reached 20.8 to one, a historical high since 1994, and at exchange booths it is above 21 pesos. During the first nine months of the year, the peso lost 14% of its value, and since 2014, it has depreciated 48%. To fight against this loss in value, the Bank of Mexico recently raised interest rates from 4.75 to 5.25%, the fifth increase in a year from 3%, to stop the depreciation and stabilize inflation—which continues to grow and could pass the 4% mark. The Bank of Mexico could still raise interest rates to 6.75% in December.

Another possible impact would be on flows of foreign investment, which would suffer greatly due to lost opportunities with a different or nonexistent NAFTA, and to the economic sanctions that might be slapped on U.S. businesses that invest outside of the United States. The auto industry is just one important sector that could be affected by Trump’s promise to put a 35% tax on the products made by assembly plants in Mexico. Foreign investment (FDI) could see a significant drop with the uncertainty we are facing, which is halting the flow of investments until people are clear about Trump’s intentions toward multinational treaties, especially NAFTA.

In fact, the trade protectionism Trump promised during his campaign, especially against China and Mexico, could be the worst piece of news for the Mexican economy. Wilbur Ross, Trump’s probable Secretary of Commerce, has already stated that if anyone should make concessions in the renegotiation of trade relations it is Mexico, because 80% of its exports are to the United States. To set the tone, Trump has already announced that he is abandoning the Trans-Pacific Partnership (TPP), which would have brought together 12 countries, including Mexico, and would have represented 40% of the world economy. Instead, he plans to create bilateral agreements, so long as they foster the creation of jobs in the United States. If he renegotiates NAFTA with Mexico and Canada, which Trump calls “the worst trade deal in history,” he could at the very least impose barriers or duties to reduce the trade deficit with Mexico. If he were to cancel NAFTA, the economic, social and geopolitical consequences could be very costly, damaging the growth potential of the entire North American region’s economy and the wellbeing of millions of consumers who today have access to goods at competitive prices thanks to free trade.

The second source of foreign income for Mexico comes from the remittances sent by the more than 34 million Mexicans living or working in the United States, another of Trump’s targets. He has suggested financing the wall with them. Whether through taxes, restrictions on transfers, or the highly unlikely illegal confiscation of the remittances, as Agustín Carstens, the governor of the Bank of Mexico has said, the impact could be very hard for a country that in 2015 received a total of 24.784 billion dollars from remittances, funds that have triggered a good deal of consumer spending in Mexico.

These factors, combined with less demand from the United States and another likely budget cut to public spending in Mexico, will have a direct impact on the country’s growth forecast. The peso’s depreciation has not been steep enough to stimulate exports. Furthermore, even though domestic consumption set off strong in 2016, it has slowed and is still too weak to compensate for the likely fall in U.S. demand. The Bank of Mexico has lowered its 2016 growth forecast to between 1.8 and 2.3% (the IMF forecasts that the Mexican economy will close out the year at 2.1%), and some analysts estimate that it is now more likely that the Mexican economy will even fall into a recession during the first half of 2017. This weak growth could worsen, due to a boom in protectionist policies from other countries, so Mexico should take on the task of diversifying the destination of its exports and focus on other regions and countries. Perhaps the failure of the TPP could help reinforce trade relations with Asian partners such as China, or allow us to look toward the barely integrated Latin American region, beginning with Central America and the Caribbean.

What would be best for North America would be for Trump’s administration to focus on the NAFTA strategic alliance in favor of growth for the North American region and on economic social, and cultural cooperation with its partners. This includes taking responsibility for sharing with Mexico a trade exchange of more than 583 billion dollars and a 3,184-kilometer border. The new U.S. administration must leave behind the confrontational rhetoric and continue to cooperate on economic, educational, migratory, and security matters, as in recent years. Otherwise, the region could end up lagging behind other regions of the world and could lose decades of economic and social integration.   

Another area that might suffer a huge setback is the fight against climate change, which is at huge risk at a decisive moment for maintaining the spike in temperatures within a manageable range. Trump has promised to repeal the global climate-change agreements, arguing that they are a “farce” made up by China to undermine U.S. competitiveness. If he abandons or weakens the Paris Agreement, approved by 196 countries, irreversible damage could be done to the planet and the global economy, which in the long run could suffer the huge costs of a worldwide rise in temperature.

Faced with these plans, we would have to wait and see what the President-elect is going to fight for and carry out once he takes office, although some of his cabinet appointments to date make us believe he could go through with his plans. If so, those of us who have worked for so many years toward including sustainable business solutions are overcome with dismay and discouragement. As the dean of EGADE Business School, an institution that heads several projects for the promotion of corporate sustainability and responsible business education—such as the Global Compact and the United Nations Sustainable Development Goals—, I am very concerned about this step backward, but I can only reaffirm our commitment to fighting climate change and to promoting economic, social, and environmental sustainability, which we shall continue to strive for when developing leaders committed to global prosperity and in the research that entails business models that consider and promote sustainability within that prosperity. 

The shattering impact of “Brexit” affects the UK in the most direct and profound manner where uncertainty reigns; the pound sterling has already plummeted to a 30-year low, the UK Prime Minister has resigned (and half of the Labour shadow cabinet), and the country is left facing not only a painful and messy withdrawal from the EU, but also the real prospect of the break-up of the UK itself; this alongside the mammoth challenge of healing a society left deeply divided by the bitterness and vitriol that characterized the UK´s Remain/Leave campaign. Whatever else happens, the UK will never be the same again. Nor the EU, for the traumatic divorce from its second largest economic partner goes to the heart of Europe´s bold vision of integration and cohesion built on common economic, social and political interest. Not to mention its formidable achievement in building the most important single trade bloc the world, a pillar of the interconnected, interdependent global economy. Brexit signals a move towards greater global fragmentation. If Brexit at its heart signals a vote against a more integrated society, a vote against an open society and a return to a society bound by isolationism and protectionism fueled by populism, then what does the UK´s decision mean for the European Union, for the US and for the rest of the world?

Brexit is a step backwards for the “European dream” of greater integration and cooperation, the bright optimism and shared idealism replaced with more skepticism and dissent. A decade ago the EU embarked on the greatest and most ambitious expansion program of its history, and then came the Great Recession 2008-2009 from which economic recovery has been painfully slow and difficult. Austerity measures have taken their toll, the hangover of the Greek debt crisis remains, high levels of unemployment endure, the region is dealing with an unprecedented migrant crisis, plus a growing dissonance by EU citizens between national sovereignty and the EU bureaucratic focus on total integration.

Meanwhile, post Brexit global economic uncertainty is likely to set in, fueled by the constitutional issues facing the UK, the prospect for political contagion (or “Nexit”) in other EU states, increasing disintegration and isolationism and the impact in the US from the fall presidential elections. Old certainties are fading away and a new, uncertain global order is being established. Markets crave stability and important potential risks lurk in these unknowns. An enormous portion of the global map is now wrapped in uncertainty not least in Latin America.

Post Brexit, global financial markets responded swiftly and Latin America is not unaffected in the short-term, nor will it be immune to the potential secondary impacts of Brexit. The immediate reaction to the UK´s decision to leave the EU saw a sharp fall in the Mexican peso, which plunged 7.1% against the dollar to a record low of 19.50 to $1. Mexico´s Central Bank, Banco de México (Banixco) provided reassurances that Mexico has the necessary financial resources to defend the peso from speculators and will use them as required and that a decision on whether to increase Mexico´s key interest rate will be made at the June 30th board meeting following an analysis of the impact on inflation. Mexico´s Treasury Secretary announced a cut in federal spending by 31.7 billion pesos ($1.6 billion dollars) as a stability measure.

With an uncertain global context, a flight by investors from emerging markets to safer assets can be expected. In Latin America this means slower and scarcer inward investment flows and that affects our economic outlook. So Mexico will likely be affected by wider global financial market impacts, weaker foreign direct investment inflows from the UK, Europe and of course, the impact of Brexit on the US, Mexico´s key trading partner.

There are clear political parallels in the US with the UK; the same populist rhetoric has taken hold across important segments of the US population who undoubtedly feel isolated or believe they have been abandoned by the impact of globalization, whether in their jobs or prospects, benefits or wellbeing. US global disengagement, to a greater or lesser degree, is a key theme in the US presidential campaign discourse. The presumptive Republican nominee has made no secret of his plans to erect a border wall between Mexico and the US, impose high tariffs, rescind the NAFTA agreement along with other US trade alliances, withdraw from global military engagement and deport undocumented Mexicans in the US. The likely Democratic nominee has referred to the need for the renegotiation of agreements deals that are beneficial for the American people, and has opposed many aspects of the Trans Pacific Partnership agreement. Emboldened by the Brexit vote in the UK, the sentiment in the US towards a greater level of protectionism and self-interest may grow.

Mexico faces these fresh challenges as it deals with existing issues: the ongoing impact of currency devaluation, lower oil prices and sluggish economic growth, as well as heavy trade dependence on its near neighbor. It is a challenging scenario indeed, but it is an important moment to focus efforts. Taking advantage of the many trade agreements that Mexico already has legally instrumented is key to Mexico´s prosperity. The conditions to diversify its trade and address the productivity lag must be encouraged, so as to boost Mexico´s competitiveness.

2016 represents an opportunity to bring to the present the plans, projects, and promises of the past. This is what happened on September 25, 2015, at a United Nations summit, where the member nations approved the 2030 Agenda for Sustainable Development, which includes 17 Sustainable Development Goals (SDGs) to do away with extreme poverty, to fight against inequality and injustice, and to assure the planet’s environmental sustainability.

Unlike the Millennium Goals, endorsed 15 years ago, today the United Nations leadership adds non-governmental players—businesses, educational institutions, and civil society organizations—, which shows that everyone must work together and take responsibility. 

As a guest at the subsequent Private Sector Forum, I had the privilege of listening to world leaders whose organizations are already implementing the SDGs in their strategies. The common belief is that the private sector is better able to offer solutions to problems like climate change, resource depletion, and the food crisis. In Latin America, meanwhile, the private sector is key to fighting some of our most deeply rooted problems, such as poverty, inequality, and a weak rule of law.

While it is necessary for all actors to collaborate to reach the SDGs, the commitment begins with each business taking responsibility for its surroundings and its communities. As the UN secretary general, Ban Ki-moon, has noted, businesses must first do business responsibly and then seek new opportunities.

“Trade and business are key to lifting people out of poverty; activists cannot do anything without joining with businesses,” admitted the singer and activist Paul Hewson (Bono). Of all the ideas he left us with, the words of his friend Nelson Mandela stand out the most: “It always seems impossible until it’s done.”

Last century, the development of most products, services, business models, and cities was driven by innovative inventions and technologies, as well as by significant economic capital. They had a strong influence on the citizen’s daily life and on nations’ growth. Today, they are all being reevaluated and are measured by their social impact, the environmental damage caused by their manufacture, the origin of the raw material, and the energy consumed in their production as much as for the economic benefit they create for a few.

The idea is to transform traditional innovation into innovation of a capital system.

Let us consider some examples of the evolution of this concept:

• The 3D printer was developed in 1984 as a manufacturing process at exorbitant prices. Only in the last five years has a product with an affordable price been designed and made to work for millions of people. Personalization of manufacturing.
• The light bulb became an excellent invention when it was part of the urban lighting system for millions of people. From product to system.
• Bernoulli’s physics principle of flow—to maintain an airplane wing in flight—turned into an air transportation system that today is the basis for the movement of goods and people all over the world. From process to system.
• The computer monstrosity of the 1950s reached a personal size, thanks to advances in microelectronics. Personalization of computers.

Innovation’s Systemic Focus

Innovation has gone through huge transformations. It has gone from classic models of radical innovation to incremental innovation, until it came together into two seemingly polar concepts: disruptive innovation and the design of innovative systems.

The concept of disruptive innovation was created by C. Christensen in the 1980s to describe disruption applied by huge products in the industry. What do Uber, Amazon, printers, 3D, iTunes, or Ryanair have in common? That more than being novel products or services, they have broken with conventional business paradigms and have had an important impact on social systems.

The large economies are using their scientific, technological, and natural resources—often exploiting those of developing economies as well—to innovate and create systems that impact more people in a more efficient way. A system’s design forces us to break with classic principles of innovation, such as those from the last century.

For example, Apple iTunes broke industry standards; Amazon broke with conventional publishing house and bookstore practices; Uber broke with the traditional business practice of transportation services and Ryanair did the same with the conventional structures of the air transportation industry; and 3D printers will stunningly revolutionize design and manufacture over the next few years, giving the end user the ability to build three-dimensional models.  

Each of these cases has had a much wider economic and social effect than just the innovation of a product or service. They have become high-value global innovation systems; allowing millions of people to benefit from them by making them affordable to more users has made them more democratic. They are cases of disruptive innovation. It is not that they invented something very new or important, but that they used the adequate technologies and the right moment to insert them and turn them into important social systems. That is why the impact of innovation must be measured by the influence it has on society, and by its evolution from a novel initiative to a democratic, open approach.

In this way, innovation with a systemic approach is integrated through the design of mechanisms that break paradigms and their insertion into more sophisticated capital systems. When the invention of a new product is transferred to a capital system we can talk about innovation with a systemic approach, which consists of designing an important disruption and planning a system with a huge impact around it.  

Innovation for Sustainability and the Common Good

As Chef Gastón Acurio—an important person in the Peruvian food industry1 —said, “The difference in our success is that we did not open a restaurant, but rather generated a movement… In a movement, one is part of an activity that generates greater economic input,” in this case, for an entire country.

This is the vision of innovation that a politician or the government in turn should reach when it wants to inspire a city. Innovation must be used to generate sustainable wealth that improves its inhabitants’ quality of life, so that in the future it becomes attractive for outside capital, technological partners, and organizations and can reduce social injustice, environmental pollution, water use, and in general the levels of extreme poverty. It means designing a pleasant, viable future with great expectations.  

This is the huge step forward we must push for in the education of those who will build the future of the planet. Leaders must be formed who know how to design and run systems. The new innovators will be those who bring together technological, social, cultural, and ecological innovation. They will have to break with the conventions of public administration and industrial development strategies. In 21st century innovation, creativity, technology, organization, entrepreneurship, and governance come together to form capital systems with a huge impact on the way of life of most of a city’s inhabitants and on their environment.