31 May 2021
Kristine Fonacier, Source: Eco-Business
Without the proper safeguards in place, a bill that incentivises CSR programs might instead open the door to highly regulated tobacco and allow corporations to whitewash their activities and exert political influence. Image: Eco-Business
A bill that financially incentivises businesses to make positive social change is close to becoming law in the Philippines. But some worry the legislation offers excessive incentives and could allow industries like tobacco to use donations to exert influence over government officials.
As the Philippines wrestles with the worst economic downturn since public records began in 1947, a piece of legislation that is designed to encourage corporates to plug holes in government services, is edging closer to being passed into law.
The Corporate Social Responsibility (CSR) Act of 2019 that aims to encourage good deeds by offering rewards and recognition to companies, has taken several attempts over the course of a decade to reach the senate (upper house), where it is currently being debated by Philippine politicians before it is signed into law by the president.
Its critics say that while the legislation could be used for good if governed properly, it could leave room for whitewashing by certain industries. The tobacco industry in particular has been singled out by the World Health Organisation (WHO) calling its involvement in CSR programmes as “an inherent contradiction”.
Industry watchdogs argue that if the CSR policy is ratified into law, that it will remove a firewall around government officials, increasing the risk of big tobacco influencing policy and tampering with tobacco regulation.
Opening the gates to a Trojan Horse
In its present form, tobacco watchdogs and legal experts interviewed by Eco-Business, including the Southeast Asia Tobacco Control Alliance (SEATCA), say that the Corporate Social Responsibility Act of 2019 (filed as House Bill 6137 and Senate Bill 656) is contentious as it lacks the strict guidelines needed to prevent fiscal abuse.
The bill circumvents existing national policies, such as the Civil Service Commission-Department of Health (CSC-DOH) Joint Memorandum Circular (JMC-2010-01), which among others, prevents government officials from accessing donations from the tobacco industry that are considered a form of interference in tobacco control policies.
Meanwhile, some argue that the bill in its current form could be exploited by other tightly regulated, and controversial, industries. “The CSR Bill provides a legal and public relations cover for companies in highly regulated industries such as tobacco, infant formula, mining and, coal power. That is not an unfounded fear because it’s already happening even without CSR incentives,” law professor Antonio La Viña told Eco-Business. If passed, the legislation will also by-pass the Philippine Milk Code of 1986 which regulates the marketing of infant milk substitutes and products that humanitarian groups say risk displacing breastfeeding.
“In the Philippines, the CSC-DOH Joint Memorandum Circular protects the bureaucracy by limiting interactions with the tobacco industry to only those strictly necessary for regulation and control; this has frustrated the tobacco industry’s influence on the officials,” Dr. Ulysses Dorotheo, SEATCA executive director, told Eco-Business in an emailed response. “The proposed CSR bill will remove this firewall around government officials as was witnessed during the pandemic.”
Lawyer Karl Carumba from HealthJustice, a non-governmental organisation (NGO), described the CSR bill as “a battering ram that will be given to industries that produce unhealthy products, like tobacco, to weaken and bring down policies that insulate the bureaucracy from their interference and influence.”
The current bill includes a repealing clause that will overturn all laws inconsistent with it – including the Joint Memorandum Circular. “Based on our analysis, HB No. 6137 (CSR Bill) seriously threatens the bastion of protection of public health policies against the influence of the tobacco industry,” Carumba told Eco-Business.
“The unrestrained definition of CSR, removal of the existing restrictions and prohibitions on local government units to solicit and accept donations, and the compulsion on local government units to extend assistance to businesses that might conduct CSR, even if these businesses have clear conflict of interest with the health policies of the former, ensures the gutting of JMC No. 2010-01,” Carumba said.
The Philippines is a signatory of the WHO Framework Convention for Tobacco Control (FCTC), signed and ratified in 2005, to protect tobacco controls from commercial and vested interests from meddling with public health policies. The joint circular, say tobacco control advocates, is needed to fill in some gaps in local laws to fulfil treaty obligations.
The CSR bill could be used as a “vehicle for the tobacco industry to legally interact with local government officials, influence local policies, build grassroot support, and interfere in legislative policy development,” according to Carumba. This could result in giving tobacco companies advantage in ensuring that public health policies are weakened or delayed at all levels of government, Carumba believes.
The draft of the CSR bill currently being considered by the senate contains new sections outlining additional fiscal incentives that aim to actively encourage companies to engage in CSR. It suggests amending the Corporation Code of the Philippines to allow companies to “retain surplus profits in excess of 100 per cent of their paid-up capital in stock when justified by corporate social expansion or corporate social responsibility.”
A position paper from the Department of Finance states that it does not support this provision as the broad definition of CSR may be used to circumvent the law by accumulating profits beyond the reasonable needs of a business, ultimately avoiding the payment of improperly accumulated earnings tax. The Securities Exchange Commission has also stressed the importance of building clear guidelines to prevent the abuse of the provision.
The CSR Bill provides a legal and public relations cover for companies in highly regulated industries such as tobacco, infant formula, mining and coal power. That is not an unfounded fear because it’s already happening even without CSR incentives.