How CSR is evolving in the Philippines
MANILA, Philippines - Is the practice of corporate social responsibility (CSR) going beyond philanthropy and public relations? Filipino leaders in this field say more and more companies have moved on from merely talking and feeling good about their efforts toward society and environment and into embracing these in their business strategies.
To obtain a snapshot of how companies practice what they preach about doing good, the League of Corporate Foundation commissioned Newsbreak, an independent media group, to conduct a survey among large companies operating in the Philippines. This is a follow up to a similar Newsbreak survey four years ago, or in 2007.
We designed the survey to determine how the companies’ CSR efforts are integrated into the entire organization, especially its profit-making aspects. To get a glimpse of how potentially sustainable are their CSR efforts, we also wanted to find out if companies exercise the same discipline in their CSR activities as they do with their main business.
The survey focused on three major areas: structure and leadership, planning and funding, and reporting and assessment. These questions help distinguish companies with genuine CSR programs from those that merely talk about it.
We asked where CSR is in their corporate structure, who initiates and sets CSR policy, and which department or division enforces it. We also asked what factors influence the allocation of annual budgets for their CSR activities, which among the company’s functional groups shells out the money, and how they report, assess, improve and communicate what they do.
Respondents answered either a printed or the online version of the survey. Management Association of the Philippines, a business group, encouraged their members, mostly C-level executives, answer it. We also conducted follow-up interviews.
Eighty one of the country's largest companies companies participated. Almost three-fourths generate more than P60 million revenues every year. They engage in varied business activities, including manufacturing to outsourcing, financial services, extractive industries, non-profit, retail, and real estate. Businesses that operate in Mindanao, Visayas and Luzon are represented.
Here are the key findings:
1. Favorable enabling environment for CSR to thrive in Philippine companies remains because people at the top support and push it within the organization
2. Most of the CSR activities are still mainly philanthropy and event-driven, but employee volunteerism has become more prominent in the CSR designs
3. Results assessment, which is basis for further improvement, is generally weak while communication means still traditional
4. "Goodwill" is a main motivation for companies to engage in, report, and communicate about their CSR, but business economics motivate financial support
Push from the top
Pushing the CSR agenda within the organization has largely been attributed to the chief executive officer, according to the 2007 survey. At the time, the CEO initiated CSR 77% of the time. To augment funding of these activities, he or she shared discretionary funds, including his or her budget for dining out with clients and suppliers, golf tournaments and other perks, so the company could, for example, donate books or support the arts.
This year's survey captured how the CSR push has not been coming only from the top management executive but from way up. Family owners, sometimes the entire board of directors, directed the entire organization to engage in CSR. Collectively, the board directors and management executives initiated or introduced CSR to the entire organization 83% of the time.
"Our CSR is rooted in Filipino values, heightened by our religiosity [and the culture of] taking care of our family, including our employees," explained Lydia Sarmiento, former human resource head of integrated poultry producer Vitarich Corp and current president of the family foundation. "The CSR of our company emanated from the vision of the founders, particularly from my father's old paternalistic style of corporate leadership."
For the multinational companies, the main trigger came from their head office abroad. Local counterparts were required to engage in CSR 13% of the time. Global companies like Microsoft, IBM, McDonalds, Wyeth, Walmart, and L'Oreal comply with their main office's program directives, but consider local realities when they designed their activities here.
These high-level individuals or groups set the companies’ CSR policy 69% of the time, with some of them involved all the way to the preparation, development and implementation of the CSR plan.
Eighty-two percent (82%) said CSR is part of their corporate vision and mission.
Community and economics
A prominent feature in the CSR process is the corporate foundation or the founding family's charity arm. Just like in the 2007 survey, the foundation is involved in all aspects of the CSR process in 2011.
While the board and the top management officials planted the CSR seed when they initiated it in the organization, it is usually the foundation that brings the companies’ CSR activities into fruition. After all, the community where the business operates, and usually the target of foundation work, was cited as the main beneficiary of the companies’ CSR by a whopping 95% of the respondents.
Mutually beneficial relationship with the host community is a major measurement of CSR success. A hefty 70% of the respondents said community acceptance is their main goal. Another 22% considered “unhampered operations” important. These usually refer to companies that have operations in poor communities, most of them in far-flung areas. They aim to keep their equipment free from bomb blasts, their executives safe, among others,
"The community is our best security," explained Senen Bacani, president of La Frutera, which has a vast banana plantation in a Maguindanao, a region in the south where rebels operate nearby. "Not only is there no disruption in our business operations, but in a way our good name is very important in the business community because it really adds more to the credibility of what the company is doing."
However, since most respondents have a foundation whose activities are devolved from the main business units, funding for CSR activities is dependent on business economics and realities. Practical issues influence the decision on whether these CSR activities will continue to receive financial support.
“Profits from last year” was rated as the top motivation for receiving budget allocation by 27% of the respondents. In the 2007 survey, financial performance was only rated the third top reason.
Thus, aside from donations, foundations also leverage themselves by forging partnerships with external groups, including non-governmental organizations and multilateral financing institutions.
Rafael Lopa, executive director of the corporate-led social development foundation Philippine Business for Social Progress, calls these partnerships "collective philanthropy."
"A lot of companies outsource the implementation of their CSR projects. For instance, "SMART Schools" (education program of a mobile phone giant) and Coca-Cola "Red Schools" (support for schools) are outsourced to PBSP. It emphasizes on collective philanthropy," Lopa explains.
PBSP bridges the gap between the corporate members and the consortium's network of non-governmental organizations, as well as funders, including other governments and philanthropists like the Bill Gates.
Aside from funding, access to expertise that corporations do not possess motivates these partnerships. For example, real estate companies Ayala Land and SM Development Corp. partnered with World Wildlife Fund, an environmental and sustainability group, to design luxury projects in remote areas.
To determine how the mandate from the owners, board members, head office abroad, and the CEO trickles down into the organizational structure, we looked at how the different functional groups or business units participate in the CSR process.
First, the public affairs group. In 2007, this group was one of the main actors in how CSR is played out in the company. About 43% of the respondents then said the public relations group brought this up to the CEO, who in turn gave his or her blessing. It was deeply involved in the whole cycle, from planning to implementation to assessment.
In 2011, the public affairs continues its key role in how the company sets its CSR policy and executes the CSR plan. After all, “reputation and social investment” was rated by the respondents as the top motivation for the company to fund CSR.
Twenty-seven (27%) of the respondents gave “reputation and social investment” the highest rating when they were asked what determines the decision on how much funding to set aside or allocate for CSR. A good image benefits the company in myriad of ways, including the crucial ability to attract the best talent and enjoy premium pricing, among others.
Not surprisingly, 30% of the respondents said publicity is a measurement of success for their CSR.
Another top measure for success is CSR activities' contribution to "brand equity," according to more than a fourth of the respondents. CSR activities are usually a way for companies to associate positive emotions to the company or its products. To some, it is a strategy to project away from the usual attributes of corporations as just cold-blooded profit machines.
Fourteen percent (14%) of the respondents said their sales and marketing group, which is mainly in-charge of managing "brand equity," receives annual budget allocation to support CSR activities.
Achieving the companies’ “revenue goals” is one of the key motivation why the company funds CSR. Twenty-eight percent (28%) of the respondents gave it a rating of “2” in a scale of 1 to 4, with 4 as the highest.
The operations group, which manages the companies’ main product or service, is also involved. Almost one-fifths of the respondents said their operations group is given an annual budget allocation to include CSR. However, the respondents rated “support for operational targets” low when asked if it is a key reason for funding CSR.
This could be attributed to the companies' tendency to separate environmental initiatives within their business operations as separate from their CSR projects. John Victor Tence, vice president at Jollibee, showe how their new heat recovery water system in 402 stores bring annual energy savings equivalent to the yearly power consumption of 4,953 households. "This shows being 'green' but we see it as being frugal," he told an audience at the LCF-led CSR Expo in July.
Environment-friendly practices in business operations have gained more following in the Philippines than consumer or shareholder activism, which are the main push factors in the West.
The Finance group is mainly in-charge of investors and stockholders who reward and punish companies who behave or misbehave not only in their host communities but in the way the entire business operates.
However, the survey respondents said stockholders and investors are key players in CSR only 14% and 17% of the time.
Jesse Ang, the president of the International Finance Corp, the private sector financing arm of the World Bank, said these results reflected how generally weak the advocacy for the rights of minority shareholders is here in the Philippines.
"Investors or stockholders have to watch their own back," he told Newsbreak in an interview in July.
While some large companies have made CSR one of the cornerstones of their business strategy, these leaders have few followers.
"Philanthropy is still the dominant practice," Lopa admitted. Most corporate efforts remain focused on beneficiaries that have little to do with or are peripheral to how the companies create products or provide services.
Most also seem to be event-driven. For example, a local financial services firm that does not have any policy, program or product that has the environment as theme regularly conducts tree-planting. A multinational consumer company conducts dengue-free activities to promote its anti-mosquito lotion.
These one-time, one-shot activities, as well as the usual check-giving ceremonies are rarely followed up on after the day’s picture has been published in a Sunday paper or reported in the company newsletter. These activities are not likely to be sustainable.
"With philanthropy, you never really lift them up from poverty," Sarmiento noted. "But CSR in the country is evolving from philanthropy to 'integrated' CSR."
One significant finding of the 2011 study was how the growing participation of employees in CSR activities has become a way to ease CSR into how the companies make profits. In the 2007 survey, employee volunteerism was less prominent when companies designed their philanthropy, event, or other CSR activities.
The 2011 study showed that 62% of the respondents have CSR activities that are opportunities for their workers to do volunteer work. In the 2007, it was only 52%.
The increasing involvement of employees is considered significant in the way CSR is transitioning from being an activity outside the main business functions into one that engages the people that makes the business run. Sixty percent (60%) of the respondents said their employees are a top reason why the companies have engaged in CSR.
This findings support various studies on how companies provide work-life balance to their employees by exposing them in “feel good” activities. Studies have shown that happy and motivated employees are more productive at work. Fifty-two percent (52%) of the respondents in this 2011 survey said employee satisfaction is a measure of their CSR’s success.
Volunteering is innate among Filipinos. According to Martin Castaneda, the corporate communications head of L'Oreal Philippines, employees in the local unit of the France-based cosmetics and beauty firm prefer to include outreach programs as part of their company anniversary celebrations or other special company events. This is almost unheard of among their Western counterparts who thrive largely on bonuses and other monetary rewards.
The local unit of technology giant IBM takes volunteerism one step forward: the hours spent by employees doing volunteer work are included when each individual is assessed at the end of the year. "Each IBM-er is asked to at least commit to eight hours of service work. A number of us actually will go beyond eight hours. I've probably done 60 hours," shared country general manager James Velasquez. He stressed that "personal fulfillment" of each employee is the main incentive.
Aside from psychic rewards, employee volunteerism also provides labor free of cost. "There is the non-monetary contribution from employees," Bernardo Abis of Webcast Technologies Inc., a local technology firm offering location-based applications, said of their CSR activities that tap employees' support.
Goodwill and engagement
A hefty 75% of the respondents said “goodwill” is a key measurement of success. How goodwill and the other success indicators are measured, however, is another story.
The survey noted that, while CSR has the support of and push from the top, and its functional business groups engaged in policy making, planning and implementation, the mechanism and process for gathering stakeholders feedback is weak.
Felino Palafox Jr, an architect and current president of the Management Association of the Philippines realized this when he answered the Newsbreak survey. "I know we have a lot of worthy CSR projects, but I now I wonder how we [in Palafox Associates] are measuring our impact or what we gain, or understanding how we can improve," he shared.
Companies regularly assess performance as part of their business cycle to check if the entire company and the individual functional groups are far or near their business goals. It also gives an idea of how the company can further improve itself and move ahead.
However, only 6% of the respondents conduct focus group discussions and 10% carry out formal assessments to determine if their CSR process or impact has been effective. Almost half claim they conduct either formal or informal surveys. Forty-six percent (46%) rely on anecdotes.
The general tendency not to complete the feedback and improvement loop that includes a bottom-up process could be attributed to the lingering focus on philanthropy, events, and other one-shot efforts.
This dominant top-down approach is reflected in another key CSR process: how the companies report, communicate and encourage engagement. Tools used to announce, publicize, pass on or impart the companies’ CSR activities are still the traditional one-way styles.
Company newsletter is used by 74% of the respondents and media coverage, 58%. Over half depend on word of mouth to get their activities known by others.
Forty-two percent (42%) said they report about their CSR activities in their annual reports, usually as an additional information to their financial report to stockholders. Only a handful prepare a separate report that abide by the international guidelines for reporting and assessing business factors, including labor conditions, social and environmental impact of their operations, among others.
The 2011 survey added social media in the choices of communication strategies of the respondents. This choice was absent in the 2007 survey when this new online trend has not yet been introduced.
This year’s survey showed that only 27% of the companies in the survey are tapping Facebook, Twitter, including video sharing platform YouTube, as part of their communication strategy for their CSR activities.
Employees who participate in volunteer programs have already embraced it. With their digital cameras and smartphones, they take pictures or videos of themselves teaching kids, planting trees, or doing community work. Then they post these on their Facebook walls or Tweet to their online friends, generating worthy praises or otherwise.
Social media, a phenomenon only in the recent past, has been showing rosy prospects in the Philippines as a communication, feedback, and engagement tool.
CSR practitioners ought to take heed.