RBC adoption crucial for PH firms in GVCs—report

Philippine companies should by now strongly consider voluntary adoption of responsible business conduct (RBC) amid the rise in national and international initiatives imposing RBC-related obligations on businesses around the world, according to a new report.

The technical brief on incorporating RBC in business operations, produced under the ARISE Plus Philippines project, urges Filipino enterprises to adopt RBC-related codes, guidelines, or initiatives. This comes as environmental, social and governance (ESG) principles become mainstream values for many companies and investors.

According to the Organization for Economic Co-operation and Development (OECD), RBC can be defined as corporate practices “making a positive contribution to economic, environmental and social progress with a view to achieving sustainable development and avoiding and addressing adverse impacts related to an enterprise’s direct and indirect operations, products or services.”

RBC, also known as corporate social responsibility (CSR), concerns the actions of companies over and above their legal obligations and is, in principle, led by enterprises themselves, with the support of public authorities through a “smart mix” of voluntary policy measures and complementary regulation at domestic and international levels.

From a business perspective, engaging and prioritizing responsible business conduct can help attract and retain employees, improve customers’ perception of the brand as well as acquire customers’ trust and loyalty, and represent evidence of greater accountability (and thus few risks) to investors, said the brief.

For Philippine-based companies operating abroad or involved in global value chains (GVCs) or global supply chains, it is very important to take note of the growing trend to engage in voluntary RBC.

The publication, expounded in an online presentation in Manila last January, observed that several international instruments have been developed that elaborate on RBC standards.

One of these is the 1976 OECD Guidelines for Multinational Enterprises (revised in 2011), which cover all key areas of business responsibility, including human rights, labor rights, environment, bribery, consumer interests, and taxation.

The 2000 United Nations Global Compact advocates in 10 broadly worded principles good corporate practices in several areas, including human rights and environmental responsibility. This instrument has been very successful, with around 7,000 companies having signed the compact, including 44 of the 50 biggest asset managers in the world.

The 2011 United Nations Guiding Principles on Business and Human Rights include the state duty to protect, the corporate responsibility to respect, and the need for more effective access to remedies by victims.

In addition, several domestic legislations have been adopted to provide for a variety of CSR/RBC-related obligations on business.

In 2017, the law on the duty of vigilance was introduced in France, requiring companies to develop a vigilance plan to cover not just the company’s own activities over possible violations of human rights and environmental standards but also the activities of those of its controlled subsidiaries, contractors and suppliers.

The Netherlands, Germany and the European Union have recently adopted (or are in the process of adopting) similar legislative acts.

Furthermore, a growing number of international investment agreements (IIAs) include RBC provisions requiring contracting parties and foreign investors to promote RBC, and the majority of recently concluded IIAs contain a standing provision referring to RBC or CSR.

Finally, the future conclusion of a World Trade Organization Investment Facilitation for Development (WTO IFD) Agreement also contains an RBC provision touching on, among others, the voluntary incorporation of RBC by investors.

Besides encouraging enterprises to espouse RBC practices, the technical brief also urges the Philippines government to ensure the quick implementation of its commitments under the IFD to maximize both the quantity and quality of inward foreign investment.

There have been a range of measures that other governments have undertaken on this front, said the paper.

Among these is ensuring that their FDI strategy and investment promotion agency corporate plan/strategies include RBC/CSR criteria and that key performance indicators reflect such criteria.

Another is encouraging investors to establish RBC/CSR committees and to dedicate a percentage of revenue to RBC/CSR activities.

A third measure is to create specific governmental bodies, focal points or representatives to facilitate sustainable FDI.

ARISE Plus Philippines is a four-year project funded by the European Union and started in March 2021 to foster inclusive economic growth and poverty reduction in the Philippines through improved international trade performance and competitiveness.

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