Corporate Social Responsibility and the Philippine Experience

By Atty. Eldrid C. Antiquiera

Corporate social responsibility (CSR) is defined as self-regulation and cleansing undertaken voluntarily by corporations in recognition of their duties to persons or communities directly or indirectly affected by their operations (Bantekas 2004). The 2001 European Commission Greener Paper on CSR defines this responsibility as “a concept whereby companies decide voluntarily to contribute to a better society and cleaner environment.” Three generations of CSR are generally thought to have evolved. The first focused on short-term corporate interests and motives, the second on long-term success strategies; and the present third generation is aimed at addressing the role of business in matters essentially within the public domain such as poverty, exclusion and environmental degradation. During the first two phases, corporations viewed CSR as a form of philanthropy. Although the application of CSR rests on a voluntary basis, the emergent “soft law” and the efforts to make it part of corporate practice have emanated from public international bodies and efforts by non-governmental organizations (NGOs).

From the foregoing can be identified four types of CSR sources, namely: (a) public international CSR instruments; (b) NGO guidelines on CSR; (c) corporate codes of conduct; and (d) regulation of CSR through domestic legislation.

CSR public international instruments are of recent phenomena. While serious efforts were undertaken prior to the mid-1990s by certain principal and subsidiary organs of the United Nations to study the impact of multinational enterprises (MNEs) on least-developed countries (LDCs), it was opined that although MNE investment in LDCs was beneficial to the latter, the unharnessed power of many MNEs could potentially harm host states thus the need for the passage of international instruments to regulate and oversee investments by MNEs in LDCs. In 1983, the General Assembly established the World commission on Environment and Development, thus, underlying the importance of sustainable development followed by the United Nations’ (UN) Conference in Rio on Environment and Development. The Rio principles envisioned the policy that long-term economic progress must be linked to environmental protection, requiring a new and equitable partnership involving governments, people and key sectors of society including corporations. The UN Human Rights Commission also monitored the impact of MNE operations in developing countries from a human rights standpoint. With the recent adoption of the UN Norms of Responsibilities of Transnational Corporations, it would seem that MNEs have the “obligation to promote, secure the fulfillment of, respect, ensure respect of, and protect human rights recognized in international as well as national law.” However, the most influential public international instruments on CSR are the Guidelines issued by the Organization for Economic Cooperation and Development (OECD), the UN Global Compact and the 1998 ILO Declaration on Fundamental Principles and Rights at Work. Unlike other “soft law” that is addressed by particular bodies of international organizations to member states OECD Guidelines are addressed to MNEs. Although they are not legally binding on MNEs, OECD states have agreed to adhere to the Guidelines and to encourage their MNEs to observe them wherever they operate. They contain recommendations on human rights, employment and industrial relations, environment, bribery, consumer interests, science and technology, competition, and taxation.

NGO guidelines on CSR can be classified into three categories: (a) those that simply provide a set of CSR guidelines; (b) those that act as a CSR self-assessment indicator mechanism; and (c) those that are a combination of the first two. Foremost of this is the Reverend Leon Sullivan initiative in 1977 providing guidelines to companies doing business in South Africa during the apartheid which was reformulated in 1999 and is currently known as the Global Sullivan Principles focusing on eight broad directives covering labor, business ethics and environmental practices of MNEs and their business partners. They serve as reporting standards. Companies publicly pledge to integrate the principles into their operations, and to restate their commitment and report their progress annually.

On the other hand, corporate codes of conduct are policy statements that outline the ethical standards of conduct to which a corporation adheres. It contains a corporation’s objectives and policies, governance provisions relating to the conduct of its board of directors, corporate executives and their responsibility to stockholders, the investing public and other stakeholders including the community where the corporation operates. While not all corporations possess such codes, recent years have witnessed its proliferation due in large part to corporate scandals in a number of industries and the growth of public awareness and concern (Bantekas 2004). Corporate codes differ substantially from one industry to another and likewise from one company to the next. The most common entries concern environmental and labor relations flowed by consumer protection and anti-corruption.

Lastly, the importance of domestic legislation in the regulation of corporation social responsibility cannot be overemphasized. While CSR is premised on deregulation, most MNEs’ operations outside the home state are not subject to extra-territorial legislation, in the same manner that not all of MNEs’ operations within the host state are subject to rigid regulation. However, the cases of Enron and Worldcom remind us of the impact of poor corporate governance to the public thus making the same a social concern which must be addressed not only internally by the MNEs but by home and host states. The United States 2002 Sarbanes-Oxley Act is an example of legislation requiring corporations to observe sound corporation governance by requiring them to disclose and observe their codes of ethics. It requires, among other things: (a) chief executive officers (CEOs) of reporting companies to certify that their companies’ annual and quarterly reports comply with specified disclosure standards; (b) real-time reporting of material changes in the company’s financial situation; (c) prohibitions, with few exceptions, on making, arranging or renewing personal loans to CEO’s and directors; (d) prohibitions on transactions by executive officers and directors during blackout periods; and (e) acceleration of the date for filing of change of stock ownership reports by CEOs.

The Philippine Experience

In response to the growing concern regarding corporate social responsibility of MNEs, recent developments in the Philippines has brought to fore the adoption of the Code of Corporate Governance for Public Corporations by the Securities and Exchange Commission in 2002 in order to address the issue of accountability of corporate executives and directors not only to their stockholders but more importantly to their creditors and other stakeholders. The term “corporate governance” is defined as “a system whereby shareholders, creditors and other stakeholders of a corporation ensure that management enhances the value of the corporation as it competes in an increasingly global marketplace.” While the Code addresses the concern of corporate stockholders, it exemplifies at the same time, the importance of a corporate code of ethics. The scandal brought about by corporate mismanagement in Enron and Worldcom prompted Philippine corporate regulators to encourage private corporations to be more transparent in their operations in order to gain public confidence and the support of both local and foreign investors.

CSR is not only aimed at profit making for the benefit of stockholders. A corporation practices social responsibility when it engages in the promotion of social interests. CSR is a voluntary initiative on the part of the corporation not anchored on any legal precept but usually springs from its vision and mission of service to clients and customers, employees and shareholders, and to the environment and society as a whole. Business ethics and corporate social responsibility cannot be reduced to the simple obedience of the law. It is not enough for business to simply obey the law as we have learned from the disaster involving Union Carbide in Bhopal, India. Whatever is legal may not necessarily be socially responsible; whatever is unethical may not necessarily be illegal.

The 2002 Asian Forum on Corporate Social Responsibility encouraged corporations to go (a) beyond profit, meaning that the business must learn to genuinely address the common public good beyond corporate interests; (b) beyond compliance, meaning that business must respond to higher standards and principles beyond mere obedience to the law; and (c) beyond form, meaning that the company must go beyond public relations and image-building. Adherence to law and nothing more has resulted to great social disaster to mankind as what happened in the oil spill involving Exxon Valdez in Alaska, Marcopper disaster in Marinduque, Philippines and the pesticide accident in Bhopal, India.

The Philippine government under former President Ferdinand Marcos instituted the Philippine environment policy in Presidential Decree No. 1151 which requires the submission of environmental impact statements, viz.:

“Pursuant to the above-enunciated policies and goals, all agencies and instrumentalities of the national government including government-owned and controlled corporations, as well as private corporations, firms and entities shall prepare, file and include in every action, project or undertaking which significantly affects the quality of the environment a detailed statement on –

(a) the environmental impact of the proposed action, project or undertaking;
(b) any adverse environmental effect which cannot be avoided should the proposal be implemented;
(c) alternative to the proposed action;
(d) a determination that the short-term uses of the resources of the environment are consistent with the maintenance and enhancement fo the long-term productivity of the same; and
(e) whenever a proposal involves the use of depletable or nonrenewable resources, a finding must be made that such use and commitment are warranted.”

Note that the submission of environment impact assessments by private corporations and entities is mandatory. It simply shows the importance of protecting the ecological balance and the communities that may be affected by the proposed project. This decree was later amended by Sections 55 of Republic Act No. 8749 or the Philippine Clean Air Act which provides for a stricter observance of the requirements.

The Philippine environment policy as contained in Presidential Decree No. 1151, otherwise known as the Philippine Environment Code, provides standards for air quality management, water quality management, land use management, natural resources management and conservation which covers fisheries and aquatic resources, wildlife, forestry and soil conservation, etc., and waste management. It bears stressing that the provisions on air quality management was amended by Republic Act No. 8749, while the provisions on water quality management was amended by Republic Act No. 9275, otherwise known as the Philippine Clean Air Act of 2004. The provisions on fisheries and aquatic resources are now embodied in Republic Act No. 8550, or the Fisheries Code of the Philippines, while waste management is now covered by Republic Act No. 9003, otherwise known as the Ecological Waste Management Act of 2000.

Another important piece of legislation applicable those in mining operations and logging is Republic Act No. 8371, otherwise known as “The Indigenous Peoples’ Rights Act” (IPRA) signed into law by President Fidel Ramos in October 1997. The law is a living testament of the government’s firm resolve to protect ancestral lands/domain and thus establishes the National Commission on Indigenous Peoples to oversee its implementation and to protect indigenous peoples against the abuses of multinational corporations. The IPRA enforces the 1987 Philippine constitution’s mandate to the state to craft a policy “to recognize and promote the rights of indigenous peoples/indigenous cultural communities (ICCs) within the framework of national unity and development.” Moreover, the IPRA provides that development programs, projects and activities must be developed along the four-fold agenda of recognition and protection of ICCs ancestral domain (land rights), self-governance and empowerment, cultural integrity and social justice and human rights. Under the law, the following are the rights of indigenous peoples over their ancestral domain: (a) right to ownership over the ancestral lands/domain; (b) right to develop and manage lands and natural resources; (c) right to stay in territories and not to be displaced therefrom; (d) right to regulate entry of migrants and other entities; (e) right to safe and clean water; (f) right to claim parts of reservations; and (g) right to resolve conflicts according to customary law.

In line with the principle of social justice, the IPRA also safeguards the rights of indigenous peoples to life, development and civil liberties, and their right to peace and social justice.

Finally, it can be told without fear or hesitation that while the Philippines has so many laws on environmental protection, there is much to be desired with respect to their proper implementation. The requirement on corporations to secure an environmental clearance certificate (ECC) is one good example. While many MNEs have complied with the legal requirements for securing ECCs with the Department of Environment and Natural Resources (DENR), many are violating the conditions of the said certificate. What happened in Marinduque is a living example of how Marcopper, an MNE, has flagrantly violated the Philippines’ environmental laws to the detriment of the people living in the area. On October 4, 2005, the Provincial Government of Marinduque instituted a suit in the District Court of Clark County in Nevada, United States on behalf of its people to claim damages against Placer Dome, Marcopper’s parent company, for economic, health and environmental damage caused by the mine tailing spills in Marinduque. The latest word is that Placer Dome, a Canadian MNE, wants to elevate the suit to a federal court. According to the source, should this happen, the Canadian government could step in on behalf of the multinational company and raise national sovereignty as an issue and assert jurisdiction over the case.

References:

Bantekas, Ilias (2004), Corporate Social Responsibility in International Law. BUILJ, p. 309 (Fall 2004).

Philippine Star (December 11, 2005). Page 27.