Responsibility without coercion

On Oct. 18 to 19, practitioners and advocates of corporate social responsibility in the Philippines and from all over the world converged at the Edsa Shangri-La Manila hotel to participate in the 2011 Asian Forum on Corporate Social Responsibility. On its 10th year, the AFCSR provided us an excellent opportunity to look back and see how much CSR has evolved in the past decade.

Philippine companies have long moved on from, or added on to, the simple charity projects and and doles that characterized early CSR efforts in the 1960s. Today, such buzzwords as “multi-stakeholder engagement,” “creating shared value” and “strategic CSR” reflect the continuing evolution, sophistication and direction that characterize and define corporate citizenship. While companies are still concerned with protecting their bottom lines, they are now just as committed to looking after the welfare of their employees, the wider community to which they belong, and the environment. Corporations, big and small, are building partnerships with communities, NGOs and the government to formulate creative and effective responses to the overarching problem of widespread poverty through education, health, housing, livelihood, microfinancing, environmental protection, and anti-corruption and good governance programs. Moreover, these programs are increasingly being undertaken not as auxiliary projects separate from the companies’ core businesses but as embedded components of the firms’ business strategy.

What is remarkable is that, in the Philippines, this evolution has taken place in a voluntary and largely unregulated environment, spurred by the business firms’ own acknowledgement and acceptance that they have a greater role to play in society than growing their businesses and generating profit. It is no wonder then that efforts in Congress to pass a law that will mandate and regulate CSR activities has met strong opposition from local CSR practitioners. House Bill 4575 (passed on third and final reading) and Senate Bill 2747 (pending second reading) provide for the passage of a CSR Act.

During the AFCSR, I had the privilege of being invited to participate in a very interesting debate on the topic, “Should CSR be regulated to the point of being legislated?” The speakers for the pro side were Prof. David Grayson, director of the Doughy Centre for Corporate Responsibility in the United Kingdom, and Dr. Catherine Coumans, research director of Mining Watch Canada. My partner in the con side was the respected Brunei businessman Dato Timothy Ong.

In my opening statement during the debate, I laid out four arguments that form the basis of my opposition to CSR regulation and legislation:

First, there is no need for it. In the Philippines, CSR has evolved since the 1960s at a pace often more advanced than in most other countries without any legislative intervention. Corporations have not relied on any legislative impetus to improve and enhance the practice of CSR in our country. In terms of regulation, corporations and their CSR work are already subject to parameters defined by existing agencies and structures. Philippine companies are governed by the Securities and Exchange Commission’s Code of Corporate Governance, environmental laws, labor laws, and consumer protection laws. Additional legislation would not only be superfluous but also onerous.

Second, the manner and degree by which CSR is conducted are best determined by corporate management. Government cannot ordain that CSR involvement be pegged to a certain value or percentage of a company’s income or assets because the capacity to do CSR and profitability and financial condition vary greatly from industry to industry, from firm to firm. There is no substitute to the judgment of the people running a company to determine the degree and manner by which their firm should engage in CSR.

Third, mandated CSR, which could be construed as double taxation, may constitute an undue burden that could threaten a firm’s viability and competitiveness. In the Philippines, 99.2 percent of the formal business sector is actually composed of small and micro enterprises. Making CSR compulsory for such small businesses could well hamper the growth of entrepreneurship. Corporations in the Philippines already pay one of the highest tax rates in the region.

Fourth, legislating CSR will tend to stifle rather than enhance the development of CSR. Legislation cannot capture the continuously evolving dynamics of CSR. As they now stand, for example, the current proposed bills in the House of Representatives and the Senate are still focused on corporate giving and the implementation of projects and programs external to companies’ core businesses. As I mentioned above, CSR has evolved significantly into a more strategic and embedded type of corporate citizenship. In the developing framework, CSR is now integrated into the choice of business, the vision and mission setting, stakeholder analysis, and implementation plans. Thus, as currently formulated, the proposed legislation would only encourage outmoded forms of CSR and would be rendered irrelevant by the continuing changes in the CSR landscape.

At the AFCSR, it was inspiring to see the dynamism of corporate social responsibility and the depth of companies’ commitment to making a difference, and these merely served to underline that governments would best encourage the continued growth of CSR by a minimum of interference and creating an enabling environment for corporate citizenship. In other words, if it ain’t broke, don’t fix it.

Ramon R. del Rosario Jr. is the chairman of the Makati Business Club. Please send your comments to [email protected].