Enhansing Business-Community Relations

Enhancing Business Community Relations:The Role of Volunteers in Promoting Global Corporate CitizenshipPhilippine Business for Social ProgressUnited Nations VolunteersNew Academy of BusinessEditorial BoardRamon R. Derige, Associate Director, PBSPElvie Grace A. Ganchero, Manager, PBSP-Center for Corporate CitizenshipDavid F. Murphy, PhD, Director, New Academy of BusinessRupesh Shah, PhD, Action Researcher, New Academy of BusinessBeatriz Fernandez, Programme Officer, UNVProject CoordinatorAngelito A. Nayan, Senior Program Officer, PBSP-CCCNational United Nations VolunteerCharmaine Nuguid-Anden, Business-Community Relations SpecialistCover Design and LayoutKatrina B. VillaPhilippine Business for Social Progress (PBSP) was created by socially responsible business people in 1970 as a response to thesocio-economic crisis confronting their time. Today, the Foundation has firmly established itself in the social development sectorand has reaped various achievements. Working with other sectors of society, it has made a difference in the lives of thousands ofunderprivileged Filipinos. It has, likewise, been at the forefront of the practice of corporate social responsibility. As it marks its 33years, the Foundation is planting new seeds – charting directions and creating active responses to the challenges posed by thetimes.The United Nations Volunteers (UNV) programme is the UN organization that supports human development globally by promotingvolunteerism and by mobilizing volunteers. It is administered by UNDP and operates amidst growing recognition that volunteerismmakes important contributions, economically and socially, to more cohesive societies by building trust and reciprocity amongcitizens. Every year some 5.000 UN Volunteers from more than 150 different nationalities actively support the programmes of theUnited Nations itself and almost all UN funds, programmes and specialized agencies.The New Academy of Business is committed to transforming business and management practice through education and research.New Academy creates innovative learning materials to explore social, ethical and environmental questions, helping entrepreneurs,leaders, managers, workers and students respond to sustainability and organisational responsibility. New Academy also works withpartners to develop insights into these complex issues through a people-centred learning approach known as ‘action research’. Basedupon continuous cycles of reflective observation and practical application, action research creates new understandings and supportspersonal and organisational change. continued on inside of back cover

ENHANCING BUSINESS COMMUNITY RELATIONS: THE ROLE OF VOLUNTEERS IN PROMOTING GLOBAL CORPORATE CITIZENSHIP PHILIPPINE COUNTRY REPORT

W hen we began to explore collaboration between United Nations Volunteers (UNV) and New Academy of Business in 1999, the various individuals involved in our initial discussions agreed on the needto promote greater international understanding of the experience of responsible business practice indeveloping and transitional countries. At the global level, we noted the dominance of Northern and Westernperspectives on corporate citizenship and corporate social responsibility. Much of the impetus for thesenew or reformulated business concepts appeared to be coming from European and North Americanmultinational corporations and NGOs. So we wanted to find ways to give greater international voice to thediversity of business and community experience on responsibility issues in other parts of the world. Wealso wanted to identify and promote new models of doing business that would build upon and be relevantto local experience in the majority world.In mid-2001, UNV and the New Academy launched the ‘Enhancing Business-Community Relations’ actionresearch project together with various partners in Brazil, Ghana, India, Lebanon, Nigeria, Philippines andSouth Africa. In the Philippines, we have benefited from working with Philippine Business for SocialProgress (PBSP), one of the world’s leading organizations mobilizing and supporting the role of business insocial development. Established in 1970 more than a decade before Business in the Community in the UK,PBSP has developed a deep understanding of the social, economic and environmental benefits of closermore mutually beneficial business-community relationships.With the publication of PBSP’s timely report – ‘Enhancing Business Community Relations: The Philippines’– the invaluable development experience and knowledge of Filipino companies, communities, NGOs andgovernment agencies is brought together for wider global dissemination. We have very much valued thisopportunity to work together with PBSP and UNV on this project in the Philippines, and look forward tofuture, fruitful collaboration.Dr. David F. MurphyDirectorNew Academy of BusinessBath, 9 October 20034

EBCR Philippine Country Report FOREWORDA s the role of government is shrinking because of globalization, more and more companies are expected to take an active role in socio-economic development. Leadership companies, inparticular, believe that beyond philanthropy, investing in people and society makes good businesssense. These companies are beginning to realize that if they are to make a lasting and sustainablecontribution to society, they need to look into their core competencies and share their internal valuesand skills to benefit, for instance, community-based organizations, the youth or women entrepreneurs.Indeed, this is an opportune time for both large and small companies to help make a positive impacton society by sharing their most precious resource – their people.It is, therefore, with great pleasure that the Philippine Business for Social Progress (PBSP) partneredwith the New Academy of Business (NAB) and the United Nations Volunteers (UNV) to produce an‘action research project’ entitled, Enhancing Business-Community Relations: The Role of Volunteersin Promoting Global Corporate Citizenship, after two (2) years of collaborative inquiry.The Philippine Country Report, in particular, focuses on determining innovative corporate-communityrelations model and the characteristics of genuine corporate-community partnership (CCP) building.Likewise, ten (10) case studies of select companies are highlighted, illustrating their unique “brand”of Business-Community Relations (BCR).Indeed, PBSP, UNV and NAB strongly believe that it is strategic for companies to pursue corporatevolunteerism as a strategy and mechanism for BCR initiatives within the context of corporate socialresponsibility (CSR) or corporate citizenship. 5

This research project not only identifies major drivers and innovative models of BCR in a developingcountry such as the Philippines, but also, and more importantly, recommends action points on thefollowing: improving the quality of stakeholders engagement; enhancing the role of government;maximizing volunteerism as a strategy; and ensuring the effectiveness of BCR engagements throughenabling factors.We hope that this action research, together with six (6) other EBCR Country Reports from Brazil,Ghana, India, Lebanon, Nigeria, and South Africa, will help bridge the gap in understanding andcultivating relationships between communities and businesses that are more socially just andecologically sustainable.GIL T. SALAZARExecutive DirectorPhilippine Business for Social Progress6

EBCR Philippine Country ReportCommunity Relations,” implemented internationally in partnership with the New Academy ofBusinessand the United Nations Development Programme, and within the Philippines with the PhilippineBusiness for Social Progress. This project has generated a wealth of knowledge, and this PhilippinesCountry Report is one of its key publications.there is a rich and promising future for corporate volunteerism and partnerships between the privatesector and UN Volunteers. 7

EBCR Philippine Country Report TABLE OF CONTENTS 13I. INTRODUCTION 14A. The Overall EBCR Project 1. Action Research 2. Partnership Promotion and Building 19B. The EBCR Project in the Philippines 1. The Context and Objectives of the Philippine EBCR Project 2. Application of the Action Research Methodology in the Philippine Project Study a. Volunteerism as a Mode of Partnership of BCR b. The Emerging Models of BCRII. ANALYSIS AND FINDINGS 35A. Business-Community Relations in the Philippines: A Review of Literature 35 1. Emergence of BCR in the Philippines 2. Drivers of BCR 3. Emerging Models of BCR 4. Quality of Stakeholders Engagement 5. Volunteerism as a Key Component of BCRB. Business-Community Relations in the Philippines: Action Research Findings 56 1. Findings from Survey and Scoping Research a. Emergence of BCR in the Philippines b. Drivers of BCR c. Emerging Models of BCR d. Quality of Stakeholders Engagement e. Volunteerism as a Key Component of BCR 2. Findings from Case Studies a. On Emerging BCR Models and Strategies of Engagement b. On PBSP’s Experience as a Model BCR c. On Corporate Volunteerism d. Distillation Phase 9

III. CONCLUSIONS 75A. PBSP’s Corporate Citizenship as a Model Framework 75B. On the Quality of Stakeholders’ Engagement 76C. On the Enhancement of Government’s Role 78D. On Volunteerism as a Strategy 80E. Enabling Factors for Effective BCR Engagements 82IV. OVERALL RESEARCH FINDINGS: INTERNATIONAL TRENDS 87ANNEX 1: Country Background 97ANNEX 2: Case Studies • CEMEX with a Heart: A Holistic Approach to Community Development 107 • Davao Light and Power Company: Street Lighting Program 119 • Figaro Coffee Company: Save the “Barako” Bean 127 • In the Business of Making Peace: La Frutera and Paglas in the Philippines 134 • DTI/Nestlé: The “Kapihan sa Quezon” Program: A Partnership Towards Community 142 Development • Organized Advocacy for Corporate Citizenship: The PBSP Story 153 • The Petron Corporation: Volunteerism in Action (VIA) 168 • Building Community Partnerships: The Community Technical Working Group 182 (CTWG) Experience: Silangan Mindanao Exploration Company, Inc. • Sun Microsystems Philippines, Inc.: Open Source/StarOffice Training Volunteering 192 Case • Unilever/DTI : Growing Cucumbers: A Case Study on Unilever and DTI 20010

EBCR Philippine Country Report 11

EBCR Philippine Country Report INTRODUCTIONW ith business, trade, and commerce becoming more global and complex, new and greater demands for enhanced corporate social responsibility and transparency are being placed on companies by awider range of communities or stakeholders. Businesses today are realizing that they are expected notonly to concern themselves with the quality of management in their workplace (employees, shareholders,union) and marketplace (customers, suppliers), but also to take active interest in and produce an overallpositive impact on society. The latter includes sub-contractors, government agencies, local communities,NGOs, multilateral organizations, religious organizations, the media, academic institutions, and variousother internal and external interest groups.To make globalization work for all the world’s people, the UN Secretary General, Mr. Kofi Annan,introduced the Global Compact in 1999, calling on business leaders to embrace its nine principlesupholding human rights, labour rights, and environmental responsibility. More than 300 companiesworldwide have already lent their support to this new global partnership initiative.Alongside achieving their corporate goals and building goodwill toward other companies, corporationsare expected to also provide solutions to social problems, and to strengthen the local economy.Business-Community Relations (BCR), therefore, encompass various interactions between private sectororganizations and local communities that promote community development, environmental sustainability,improved labor practices and other dimensions of corporate citizenship. Business Community initiativesinclude but are not limited to cause-related/social marketing, corporate community involvement (CCI),community economic development and philanthropy. Businesses may show social responsibility byundertaking initiatives/projects related to socio- or economic issues such as education, environment,health, business ethics, intellectual property rights, culture, agriculture, human rights, human resources,poverty, gender, etc. (Mahajan, UNDP) 13

A. THE OVERALL EBCR PROJECTI n mid-2001 United Nations Volunteers (UNV) and the New Academy of Business, U.K., launched an 18-month action research project entitled “Enhancing Business-Community Relations: The Role ofVolunteers in Promoting Global Corporate Citizenship.” This project was conceived as one ofnumerous initiatives that UNV launched during the International Year of Volunteers1. At the time itwas recognized that little was known about the extent to which healthier relationships were beingforged between communities and businesses in developing and transitional countries and the rolethat volunteerism would play in these relationships. The objectives of the collaborative project were: 1. To explore current trends in business-community relations and corporate citizenship in seven developing countries – Brazil, Ghana, India, Lebanon, Nigeria, Philippines and South Africa. 2. To identify and promote new models of business-community relations and enhanced corporate citizenship practices at the local level in these developing (or transitional) countries. 3. To engage the participation of volunteers as partnership facilitators between UNV and other agencies businesses, and local communities.Seven locally based “UNV Specialists in Business-Community Relations” spearheaded the action researchefforts. The project drew upon the strengths and resources of host partners: Instituto Ethos in Brazil, theAssociation of Ghana Industries (AGI) in Ghana, The Energy and Resources Institute (TERI) in India, PhilippineBusiness for Social Progress (PBSP) in the Philippines and the African Institute of Corporate Citizenship(AICC) in South Africa. For the Lebanon and Nigeria components, the UNV Specialists were based at UnitedNations Development Programme (UNDP), coordinating efforts with UNDP’s wider private sector engagementin these two countries.1 see http://www.unv.org/infobase/anrep/2001/ar01_en.pdf.14

EBCR Philippine Country ReportImplementation agencies were: OVERVIEW OF THE ACTION RESEARCH1. The United Nations Volunteers METHODOLOGY programme (UNV) In order to create sustainable and UNV is the volunteer arm of the United responsible business practices, companies Nations. Established by the UN General are confronted by paradoxes which arise Assembly in 1970, UNV, which works when they attempt both to shift cultures through UNDP’s country offices around the and frames of reference as well as to world, promotes volunteer contributions to institute new action. Much writing and development and serves as an operational research on these issues has been partner in development cooperation at the theoretical, or has taken the form of request of the UN member states. advocacy:2 little of it is based on practice, documenting what is being learned by those2. The New Academy of Business, U.K. who are actively working at change towards sustainable and responsible business, at New Academy of Business is an both small and large scales. This project has independent business education sought to use an approach to research organization and a registered UK charity known as collaborative inquiry, drawn from that was established in 1995 by Anita the ‘action research’ family of Roddick, founder and Co-Chair of The methodologies, to explore current trends in Body Shop International Plc. Since its business-community relations and related inception, the NAB has been at the corporate citizenship initiatives in seven forefront of a new wave of business countries. thinking and action on global corporate responsibility. Action research is unlike traditional research in that participants seek to act inThe project is composed of two phases: an action ways that are both useful to the peopleresearch phase and a partnership promotion and involved – producing knowledge that isbuilding phase. relevant and practical – and empower the participants as they construct and use1. Action Research knowledge.3 Work is done – in both personal and group settings – to bring the values, This phase included a qualitative research ‘theories’ and practices of an individual study aimed at businesses to investigate closer together. Participants engage in why and how they became involved in cycles of action and reflection: individuals development initiatives. Research and groups move between acting, observing findings from each country were compiled2 See articles in the Journal of Corporate Citizenship or Business and Society Review, for example3 For elaborations on the family of practices labelled as action research – around which the New Academy bases its researchactivity – see Handbook of Action Research by Reason and Bradbury (2001). For research into corporate responsibility using 15action research methodologies see Bendell (2002), Prieto and Bendell (2002) and Shah (2001). 15

and jointly analyzed. The UNV and the New Academy of Business coordinated the OVERVIEW OF THE ACTION RESEARCH research in the seven countries and METHODOLOGY (...continued) would disseminate the findings via conferences, workshops and publications. experiences and then reflecting upon these, with the intention that more meaningful action can be generated. Collaborative2. Partnership Promotion and Building inquiry is a form of action research that seeks to promote open, shared reflection The project would offer to individual about organizations. This, in turn, enables companies tailor-made strategies that participants in the research process to would benefit both their firm and local address organizational and personal value communities. Various activities under the differences and to find creative ways of project include: resolving paradoxes. a. Creating awareness through The project has been designed to enable written, audio visual, and virtual each UNV specialist to undertake research media (web-site and e-mail list). with his or her UNV colleagues, working in similar but different ways in other parts of b. Identifying and forming the world, but with common objectives. By partnerships between various finding ways to connect with co-inquirers, stakeholders including UNDP, to share experiences and discoveries – other lead UN agencies, civil including what each found difficult about society, local community-based their action – the aims were to enrich the associations and NGOs, businesses, process, build a shared understanding of the associations, chambers of work being done, and develop skills in commerce, universities, etc. collaboration that were directly relevant to the partnership-building task. c. Organizing national workshop to bring together businesses and This form of inquiry is often seen as having development actors together for four main characteristics: brainstorming, dialogue and joint action. • It is conducted in repeated cycles of action and reflection. The interplay d. Publishing reports, brochures, between what is discovered and newsletters, case studies, and a achieved through action, and what guidebook on businesssense is made of this through reflection, community relations.16

EBCR Philippine Country Report OVERVIEW OF THE ACTION RESEARCH METHODOLOGY (...continued) e. Formulating Project Document/ is important, lending a discipline to the Joint Project Proposals with UNV/ process UNDP/UN Agencies/ New Academy of Business. • It seeks a balance between inward, reflective attention and outward, f. Attending to other activities as practical attention. may arise within the course of the project. • Being an action inquirer also requires the development of a ‘critical’ perspective – being able to get some distance between both the action andProject Activities experience, and evaluate it, in the light of ideas, theory, reading, and otherDuring the project each of the UNV specialists perspectives.undertook a range of collaborative inquiry andnetworking activities. Following the orientation in • Working in this way demands that thethe UK in September 2001, the project specialists researcher develops participation andreturned to their respective countries and began collaboration, with other co-inquirersgathering information and resources regarding the and with those with whom they arestate of business-community relations at the working such as sponsors, hosts, andnational level and documenting good practice those who supply information. Theexamples. Between April and September 2002 intention is that this kind of researchnational workshops were conducted in each of the is conducted not on people, but withseven countries. In seeking to go beyond traditional people.research, the specialists also developed theirunderstanding by engaging in partnership-buildingat the national level and sharing experiences acrossthe seven countries through online discussionand sense making. 17

Project Reports1. The various activities at national level are described in the seven country reports. Each country report offers the reader an overview of current national trends in business-community relations, corporate citizenship initiatives and the role of volunteers in these processes.2. Additionally each report presents ten case studies (total 70 case studies from the seven countries) that highlight specific practices in the area of business-community relations.3. A final global report will be made available towards the end of 2003. It will draw together the work from the seven countries and develop a synthesis of international trends in business community relations, with special attention given to the role of volunteers in promoting responsible business practice.4. Finally, follow-up projects will be developed, all aimed at continuing to create healthier relations between communities and businesses.Project BenefitsHow will the corporate sector benefit from this project?1. The project will directly benefit businesses and local communities which participate in projects that are generated, as well as local sub-contractors and suppliers that are directly and indirectly affected by relations between participating communities and companies.2. By engaging in community initiatives, companies will clearly benefit from: • New partnerships with UN agencies; • Enhanced brand image and reputation; • Improved customer goodwill and loyalty; • Increased attractiveness to investors; • Strengthened relationships with all stakeholders; • Improved prospects for long-term financial and organizational success; • Enhanced perception among communities and the public; • Strengthened employee loyalty, commitment, morale, retention, and performance; and • Enhanced ability to attract more talented and motivated employees.18

EBCR Philippine Country ReportOther benefits of the project are: • enhance international understanding of the meaning and experience of business-community relations across different geographical and socio-economic contexts; • facilitate international learning and networking for the development of partnerships and promotion of locally grounded models of healthy business-community relations; and • encourage the active participation of volunteers in the promotion of business-community relations and related global corporate citizenship practices.B. THE EBCR PROJECT IN THE PHILIPPINESW hile globalization, especially in the past decade, has brought about positive changes in the socio- economic and political environments of many countries, it has put developing countries like thePhilippines in a disadvantaged position. The issues and problems that have surfaced in the country becauseof globalization have called for redefining roles of government, civil society and businesses, and havedemanded new approaches and strategies to address these concerns.Government, business and civil society have responded to this challenge by way of exercising their influenceand power. In order to achieve development at national and local levels, these three sectors are learningto be more inclusive, more efficient, transparent and accountable in the way they operate and morestrategic as they aim to institutionalize and sustain their efforts. These sectors have recently emerged asorganized stakeholders instead of beneficiaries and have new demands and expectations from one anothertoward sustainable community development.Some members of the business sector have come to a point where involvement for social good is nolonger considered optional. Corporate Social Responsibility (CSR) or Corporate Citizenship (CC) servesas a guiding principle that compels companies to make strategic choices based on an understandingof the total impacts of their business to the community, in particular, and to society, in general. CSRposits that corporations have social and environmental objectives on top of their economic purpose.Recently, the notion of CSR has been reviewed in the light of the challenges brought about byglobalization. The slowdown of Philippine economy has an effect on the amount of resources thatbusiness will channel for social welfare. Thus, corporations are looking for models of CSR that work 19

best for the company and society and practices that create greater value to both business andcommunity. An understanding of such models will also enable CSR advocates to innovate and sustaintheir efforts within the context of the changing roles of the various stakeholders in a globalizingenvironment.1. The Context and Objectives of the Philippine EBCR ProjectIn the Philippines, the project was hosted by the Philippine Business for Social Progress (PBSP), a leadingcorporate-led foundation which promotes business sector commitment to social development. The projectwas specifically billeted in the program portfolio of the Center for Corporate Citizenship (CCC), whichserves as the Foundation’s arm for research and advocacy, program development, dissemination and resourcemobilization for corporate citizenship.As shown in Fig. 1, PBSP over a period of 30 years has seen corporate citizenship expressed in four, oftenoverlapping, areas: 1. Environmental Stewardship; 2. Managing Workplace Concerns; 3. Social Investment; and 4. Corporate-Community Partnership.The EBCR project was grouped under the latter two areas of the Center’s work plan with emphasis onCorporate-Community Partnership (CCP). Figure 1: The PBSP Corporate Citizenship Framework©20

EBCR Philippine Country ReportUnder PBSP, the Philippine EBCR project objectives focused on determining innovative Philippinecorporate-community relations models and the characteristics of genuine corporate-communitypartnership building. The project sought to examine the dynamics of corporate-, community- andgovernment-facilitated BCR, the enabling and hindering factors they face in BCR promotion andimpacts of their efforts to the community. The project also intended to look at volunteerism as a keycomponent of BCR. Since the Philippines is one of the few developing countries with a long historyof CSR, the project aimed to promote CSR not only for local advocacy but also as model or benchmarkfor other developing countries. PBSP, a pioneer and strong player in Philippine CSR, was also considereda UNV partner for potential joint projects, aside from companies and communities.2. Application of the Action Research in the Philippine Project StudyThe project adopted the action research as a methodology to explore current trends in business-communityrelations and related corporate citizenship initiatives in the Philippines. Following PBSP-CCC’s ProgramDevelopment Management System, the action research and project proposal phases were stretched to a 5-phase loop: Research, Distillation (generally done with external publics), Program Development and Piloting,Evaluation and Documentation and Dissemination. As the Overall Project itself only has 2 phases, theapplicability to the local Project is only until the 3rd phase. Any work that would extend to the 4th and5th phases would be part of the work on the implementation of the proposal itself. Figure 2: Program Development Management System and the CC Framework 21

Research PhaseUnder the Research phase, new actionable and emerging issues that touch on the four CC themes wereidentified. Employing the Scoping Research Terms of Reference developed by PBSP, ten (10) case studieswere developed and used as the base for thematic-sectoral analysis (Government, Business, Civil Society).These ten case studies were developed using key informant interviews, focus group discussions (with thestakeholders involved in each identified engagement), as well as document analysis.Presented on the next page is the Philippine research implementation matrix.22

EBCR Philippine Country Report Table 1: Research Implementation Matrix Research Themes Specific Research Research Components Objectives/ AgendaOverarching Theme: Enabling Volunteerism and Stakeholder Partnership as a Context and Method for Corporate ResponsibilityPBSP (Center for Corporate • Identify specific challenges/ Case study on the Center forCitizenship) as a developing opportunities for corporate Corporate Citizenshipcountry model of corporate citizenship in a developing countrycitizenship contextQuality of Stakeholder • Identify trends and gaps in • Scoping Research onEngagement (Business- stakeholder engagement (i.e. Corporate-CommunityCommunity Relations to business, civil society, Engagements (in the contextCorporate Community communities, etc.) of Volunteerism)Partnerships) • Identify alternative/ non- • 6 case studies traditional activities/ venues for corporate responsibility/ volunteerism • Identify alternative venues for promotion of quality stakeholder engagement • Promote stakeholder view of communities • Promote internal (i.e. employees), virtual, national & global community concepts • Promote views on volunteerism as a context and mechanism for stakeholder relations • Provide a mechanism for community/civil society pursuit of corporate responsibility - empowerment of communitiesEnhancing Government Role • Enhance the role of national govt. • Scoping Research onin encouraging responsible in encouraging corporate Government-facilitatedcorporate behavior responsibility Business-Community Relations • 3 case studies • Survey on Correlation of Fiscal Incentives and Socially Responsible Corporate Behavior 23

Distillation PhaseThe Distillation phase involved the conduct of interactive sessions with internal and external groups inorder to get additional input and broad-based understanding and/or support for particular options orpositions.To a large extent, the Meeting of Minds (MOM) at the 1st Asian Forum on CSR was used as an ad hocinteractive session to share preliminary findings. For more focused discussion, a Roundtable Dialogue wasconducted with key internal and external audiences. The final version of the Country Report itself wassubjected to a Round Table Discussion on September 9, 2003.Program Development PhaseThe Program Development Phase employed a management systems approach to ensure institutionalizationof programs and projects with the following aspects: policy development, strategic program developmentand implementation, systems development, and measurement.Table 2 on the next page shows the input–mechanism—output matrix of the Philippine Research Project.24

EBCR Philippine Country Report Table 2: Input-Mechanism-Output Matrix of the Country ProjectCOMPONENTS ACTION RESEARCH PROGRAM ADVOCACY DEVELOPMENT AND Project Proposal PROMOTION PBSP as CC Incentives/ Govt.-led CCP/ expression CCP and Volunteering/ Perception PollPROCESSINPUT • Key • Scoping Research Design • Research results • Research Informants Secondary Data • Companies results • Records of • Key Informants • Communities • Leading CSR CSR Practices • Networks practices • GovernmentRESOURCE/ • CSR Evolution • Benchmarking tools • Dialogues and • IEC MaterialsMETHODS Analysis • Research tools (i.e. discussions and other • Review of survey, questionnaire, • Resource promotions CSR literature interviews, dialogues, etc.) mobilization • Dialogues • Interviews & • Volunteer effort • National Dialogues WorkshopOUTPUT • CSR Evolution • Position on volunteerism • Partnership • Increased Documentation as context and strategy generation awareness, • Identification • CCP, Incentives & acceptance of new CSR alternative volunteering and level of trends/ cases practice practices • Impact indicators of CCP • Validation of and CSR CSR • Research papers Framework • Project Synthesis papers • Country Paper 25

Research FocusThe study focused on two major areas: volunteerism as a component strategy of BCR and the models andstrategies of quality engagement in BCR.A. Volunteerism as a Mode of Partnership of BCRVolunteerism can mean many different things across cultures and states. Volunteering is an act of exchangeand reciprocity that is likely to have multiple meanings, takes different forms, and is defined by itsenvironment. A UNV background paper prepared for the Expert Group Meeting on Volunteering & SocialDevelopment held in 1999 suggested a framework of voluntary actions with the following definingcharacteristics: • Actions should not be undertaken primarily for financial reward, although reimbursement of expenses and some token payment may be allowed. • Free will is an essential element of voluntary actions. • Actions can occur within or outside formal organizational or institutional settings. • Actions should benefit some individual or group other than just the volunteer himself/herself. • The levels of commitment can vary depending on the person, activity and resource.PBSP distinguished four kinds of volunteering activity delineated according to final outcome or finalpurpose: mutual aid or self-help, philanthropy or formal service delivery, participation or civic engagementand advocacy or campaigning as shown below. Each is described in Table 3.26

EBCR Philippine Country Report Table 3: Characteristics and Kinds of Volunteering ActivitiesCharacteristics of Volunteering Kinds of volunteering activityVolunteering takes different • Mutual aid or self-help plays a primary role in community welfareforms and is defined by its in many parts of the developing world. It is often the mainenvironment. However, there are system employed for social and economic support.key defining characteristics of • Philanthropy or Formal Service Delivery is distinguished fromwhat are deemed voluntary self-help in that the primary recipient of the volunteering is notactions: the member of the group him or herself but an external third • Not taken on primarily for party, though it is acknowledged that philanthropy includes an financial benefit element of self-interest. • Taken on according to an individual’s free will, though • Participation or Civic Engagement refers to the role played by grey areas exist in this individuals in the governance process, from representation on aspect. govt. consultation bodies to user-involvement in local dev’t.Must benefit someone other projects. It is most developed in countries with a strong traditionthan the volunteer, or society at of civic engagement.large, though it is recognized • Advocacy or Campaigning are often instigated by volunteers, alsothat the act brings significant known as activists, specifically targeted to effect legislativebenefit to the volunteer as well. change or other forms of broad sweeping social improvements.The kinds of volunteering activity identified during the Expert’s Group Meeting provide the contexts forengagement that can be formed by other sectors with the business sector. This is especially challengingbecause the characteristics of business activities and goals are often not the same as the characteristicsof volunteerism. Thus, there would be a need for a framework by which the different stakeholders couldobtain the same goals and equitably-shared benefits and risks under the auspices of volunteerism.The EBCR study was expected to help determine the connection between volunteerism and BCR practices. 27

B. The Emerging Models of Business Community RelationsThere has been a lot of debate on the definitions of Corporate Social Responsibility (CSR), CorporateCitizenship (CC) or Business Community Relations (BCR) as all of them reflect in one way or another thediverse policies, methods and processes that the business sector uses in interacting and relating with theother sectors and communities.Philippine business associations agree on these definitions:4 • That CSR is the baseline behavior (i.e., compliance) that companies should demonstrate in society. It embodies the social mission of corporations on top of their economic purpose. • That corporate citizenship is about companies going beyond the expectations of communities, government, and civil society.Underpinning these definitions is the concept that business is responsible for more than profit-making. Because of its inherent strengths, such as resources and technical capability in an increasinglymarket-driven society, the business sector should also be responsible for and contribute to society-building.There are four paradigms of CSR that are implemented in the Philippines:5 1. Corporate-Giving or Philanthropy Corporate-giving or philanthropy is defined as providing resource to intended beneficiaries. Over time, this can develop a dole-out mentality and over-dependence on corporations. To prevent this mindset, corporations have begun to treat corporate-giving or philanthropy as a community or social investment, thereby reframing giving in terms of what the returns to the community or society are. 2. Business Community Relations BCR is the direct involvement of the company in community-based programs either by themselves, in partnership with an NGO/a community association/a local government, or in coalition with other businesses. The partnership approach to development is common in the Philippines. There is the prevalent desire to pool corporate resources to achieve greater impact.4 Taken from a series of Focus Group Discussions on Benchmarking CSR in the Philippines conducted by PBSP.5 Juan Miguel Luz, Corporate Social Responsibility in the Global Community: A View From The Ground: Building PartnershipsFor Development, 2000.28

EBCR Philippine Country Report 3. Business/Industry Practices Business and Industry Practices type of CSR is shown through codes of conduct where “best practices” begin to be viewed as standards for operating businesses. These have become important self-regulating mechanisms and vehicles for corporations to buy into industry-wide practices. 4. CSR as business strategy CSR as business strategy is the new area of development with two modalities: (1) as an alternative delivery mechanism for a public good, and (2) privatization of the public service. This means that businesses can provide the services that government cannot deliver.These paradigms of CSR define the roles and the strategies of business organizations in relation with theother drivers of CSR — the government and civil society — to effectively implement their social responsibilityactions and programs. As BCR is just one of these paradigms, the EBCR study posited that there areemerging models of BCR in the Philippines and that these models present different ways of engaging withthe different sectors involved in BCR.In order to understand the strategies adopted by the stakeholders of BCR, the study looked at the followingareas of research: a. Government Influence on CSR In recognition of the greater role the private sector plays in social development, government has been proactive in encouraging and implementing tri-partite efforts towards development, particularly in the rural areas where the bulk of poverty exists. The presence of a government advocate can at times promote or hinder business-community relations. Some private sector participants allege that the strong state (or government) element promotes a compliant rather than a voluntary environment, which would make participants less innovative. Incentives have been used by government to indirectly influence private enterprise behavior. In the last decade, with the intent of spreading job creation and social development, incentives were offered for businesses to start up in poor regions. The EBCR project looked at government-led, business-oriented partnerships to assess the viability of such engagements. The research looked at how government influences companies 29

to engage in CSR through incentives. Given that incentives and similar instruments are dependent on the government’s perception of businesses, in the overall context of this project, there might be a need to assess the awareness of government offices about CSR and to identify the most effective government action that promotes CSR behavior. b. The Community and Civil Society: Stakeholder or Beneficiary? Companies often define their communities based on their operation’s areas of immediate impact, i.e., host communities of plants or headquarters, sectors in line with the business, etc. These are often done through community relations programs or personnel specifically assigned for the task. However, despite cases of best practices in this area, the level of participation in communities and within the company in general has been argued to not be that extensive. In this arrangement, the beneficiary approach seems to be most prevalent, and in some cases has proven to be detrimental to both parties as the level of dependence escalates. This project challenged the traditional perception of communities by business by looking at emerging community models, such as treating the community as a “stakeholder.” With PBSP, the project also looked at ways of improving traditional corporate-community engagements. In order to promote partnerships between business and communities, it was found imperative that a two- pronged approach be taken to influence not only corporate but also community behavior. c. Organized Business Involvement: PBSP as Model of CSR/CC in Developing Countries Business involvement in the development of communities in particular and society as a whole started very early in the Philippines. The colorful evolution of this corporate social responsibility is summarized in the section Findings Based on Review of Literature. Organized business involvement can be considered to have begun about thirty years ago. In December 1970, in what was known by the top executives of the 50 biggest corporations in the country as “a divine conspiracy for development”, the Philippine Business for Social Progress was formed. Now thirty-three years in existence, PBSP continues its mission of championing the social development cause in the business sector. Held together by a purely voluntary working board of 21 CEOs and a professional social development staff, the organization has gone through various stages of work — from that of fumbling around in the dark (“What do we know about social development?”) to operating a highly professional social development NGO that integrates business goals with social goals.30

EBCR Philippine Country ReportThe research also looked at the evolution of CSR in the Philippines in order to provide inputto other UNVs’ drivers/enabling mechanisms they can look for or develop to promote corporatecitizenship in their countries. The project focused on PBSP’s Center for Corporate Citizenship as adeveloper and promoter of corporate citizenship from a developing country’s perspective. Thisstudy includes a presentation of the learnings distilled from PBSP in its 33 years of life. 31

EBCR Philippine Country Report II. ANALYSIS AND FINDINGST he data and information about EBCR in the Philippines were drawn from two major research sources. The first source was the extensive literature on the evolution and development of BCRin the country. The second source was the findings of the surveys, case studies, and action researchconducted by PBSP in collaboration with UNV and New Academy.A. BUSINESS-COMMUNITY RELATIONS IN THE PHILIPPINES: A REVIEW OFLITERATUREThe application of CSR in the Philippines is well documented. This desk review shows the evolution of BCRin the Philippines, the drivers of BCR, the emerging models of BCR and the strategies adopted to improvethe quality of engagement with BCR stakeholders.1. Emergence of BCR in the PhilippinesThe involvement of business in social activities can be traced to the time when it was the practice ofwealthy families to give donations to the Church and charitable institutions. (Read the country’s profilein Annex 1: Country Background).From the 1960s to the 1990s, corporate philanthropy underwent a process of transformation. The stronginfluence of the Roman Catholic Church on personal, state, and economic affairs paved the way forbusiness altruism. The practice of corporate social responsibility emerged during the late 60s as abusiness response to growing social unrest. Amidst activism in the 60s and the 70s, to the concern for theenvironment in the 80s and 90s, corporate philanthropy took on a new meaning. From then on, businessesbecame proactively involved not only in the economic affairs but also in the socio-political affairs of thesociety, mainly through their CSR programs and efforts. 35

Presented in the next pages is a summary of Velasco’s (1996) study of corporate philanthropy in thePhilippines. It describes briefly the periods that Philippine corporate philanthropy underwent and thevarious socio-political events that affected it.6The First Decade (1960s): The Decade of DonationsSocial involvement of business during this period was very simple and uncomplicated. Usually, privatecompanies provided charitable institutions with donations in kind or in cash.Social inequity was beginning to take its toll during this period. The top 5% of families were receiving anannual income 33 times the average of those in the lower 20%. As a result, social unrest erupted.Discontent in the countryside and in factories led to massive protest demonstrations that came to beknown as the riotous period of “the First Quarter Storm.” As witnesses to demonstrations within thefinancial district where they worked, progressive business leaders reassessed the role they played in thecountry’s development. The conclusion was while businesses had been supporting charitable activities ina sporadic, fragmented and uncoordinated basis, there was a growing need for organized, professional andcontinuing assistance.The Second Decade (1970): The Decade of OrganizationInspired by Dividendo Voluntario para la Comunidad, a business association in Venezuela, several businessleaders (among whom were Jose Soriano of San Miguel Corporation, Sixto K. Roxas of the EconomicDevelopment Foundation, and Howard Dee of the Association for Social Action) organized the PhilippineBusiness for Social Progress (PBSP). PBSP aimed to develop a method of attacking national ills “in a waywhich parallels the vigor and industry with which private enterprises tackled the challenge of economicdevelopment in the country.” Support for the organization came from annual voluntary contributionsfrom member companies who pledged to commit 1% of their pre-tax net profits. Of this amount, 60%was channeled through PBSP to finance development projects for the member companies while the restwas retained by the company for its own programs.PBSP’s primary activities during this period included capacity building of its staff and partner NGOs,developing a focused grant-making program, and maintaining the interest and commitment of its membercompanies.Aside from PBSP, the Bishops-Businessmen’s Conference (BBC) and the Association of Foundations (AF)were founded in 1971 and 1972, respectively. BBC served as the venue for the Church and the business6 Ma. Gisela T. Velasco, Corporate Philanthropy in Asia: The Philippine Case, 1996.36

EBCR Philippine Country Reportsector to address their common concern for the poor. The AF, on the other hand, was the country’sfirst network of foundations. PBSP, BBC and AF operated independently but shared a common role inpromoting corporate social responsibility.The Third Decade (1980s): The Decade of InvolvementThe early part of the decade saw the Philippine economy shrinking in size and foreign investments pullingout. This situation was triggered by the worsening debt crisis, the political turmoil after Benigno Aquino’sassassination and insurgency in wider areas of the country. In the midst of this crisis, communities turnedto the companies near them to provide much needed support. Many companies responded by providingservices to the communities. This practice evolved what is now known as Community Relations or Comrel.The initial Comrel efforts were largely welfare-oriented responses to a crisis. Companies viewed Comrel asa means of improving the economic conditions of their communities in order to promote peaceful businessoperations. Companies began to expand their notion of stakeholders — from shareholders to employees toexternal publics such as the community — and redefined the meaning of their responsibilities.In January 1993, PBSP conducted a survey of 110 companies known to have Comrel programs. There were55 respondents. The survey findings were: - Comrel was practiced by companies regardless of size, sector or location - The CEOs were the drivers of Comrel - Companies with plant-based operations or geographic considerations implement Comrel with wider target base and broader concerns - Comrel was provided with limited manpower and was managed on a part-time basis under the Human Resource Departments - Comrel issues include the need to translate social policies into coherent programs and to secure greater support from internal constituents such as employees and shareholders.Comrel entailed the building of new types of relationship with the public. It prompted the companies tobalance their interest for profit with community concerns. Finding the right fit was the challenge and thekey to success. 37

The Fourth Decade (1990s): The Decade of InstitutionalizationCorporate Citizenship emerged during this period. CC suggested that “a corporation that derives profitfrom society has duties and responsibilities that must contribute to society’s well-being.” CC encompasseda variety of initiatives that businessmen were beginning to take part in, from corporate giving to Comrel,policy formulation and networking.Acknowledging the important role of CEOs in thinking through and trying to resolve the problems thatbeset the country, PBSP created the Center for Corporate Citizenship (CCC) in 1992. CCC addressed itselfto the growing demands of an increasingly complex society or community as well as profit-making needs.The Center served as a venue where CEOs discussed long-term issues on environment, education,local governance, and countryside development. Here, CEOs identified strategic social investmentsthat business could undertake – “strategic” and “social” in order to focus on what would give thegreatest returns to society given the limited corporate resources; “investments” as a way of thinkingabout more permanent interventions rather than mere ad hoc reactionary giving.The Fifth Decade (2000s): The Decade of Continuous Improvement7On its 30th anniversary, PBSP reconstituted the mandate of its CCC to include conducting researchand test programs and setting up management frameworks that would enable companies to carry outtheir CSR properly and provide them with the means for continuous improvement.Recognizing the country as a seriously fragmented society, divided economically and socially and where50% are poor and disempowered, PBSP renewed its focus on poverty alleviation. This time, it pushed forthe participation of corporate citizens in improving access to basic services, education, and credit, anddeveloping new skills for the workforce to help them improve their lives.It was within this period where PBSP launched the “Benchmarking Corporate Citizenship” and the “CorporateVolunteer Program: Linking Worlds.” The first promotes ethically, socially, and environmentally responsiblebusiness as exemplified by the best practices of its member companies. The second program, on the otherhand, encourages companies to mainstream volunteerism into their regular functions by providing themwith support services. These services include matching companies with volunteering opportunities,developing viable models in corporate volunteering, assisting companies in adopting a systematic approachto employee volunteering, facilitating volunteer engagements, and giving due recognition to outstandingemployee volunteer programs and projects.7 PBSP Annual Report 2002.38

EBCR Philippine Country ReportThe evolution of BCR in the Philippines manifests the great contribution of PBSP in CSR. Currently,PBSP is the largest grant-making business organization in the Philippines. In 33 years since itventured into social development, PBSP has mobilized and invested over P5 billion pesos in socialdevelopment programs from membership contributions and funds from Official Development Assistance(ODA). Working with over a thousand partner organizations worldwide, it has trained NGO workersand grassroots leaders who serve the needs of close to two million marginalized Filipinos.2. Drivers of BCRLuz (2000) described the drivers for BCR as external and internal. The external drivers include: (1)government- its regulation and laws; (2) increasing demand of society for business to alter behavior, asarticulated by the civil society; and (3) market forces. The internal drivers are: (1) individual managers’behavior; (2) employees’ participation; and (3) BCR as strategy for better operations.8a. Societal Demand and Market ForcesThe Philippines’ poor growth performance due to economic mismanagement and political instabilityare seen as the main causes of poverty. There is a wide gap in income distribution between the rich and thepoor who has limited access to basic social services. This gap is wider in Southern Philippines, whereabject poverty is a major reason for strife between Christians and Muslims. Infrastructure is still a majordeficiency in several areas of the country and contributes to the high cost of business and development.Political instability, even after the “EDSA 2” revolt continues to harm the image of the country in theworld. National security has been threatened as outlawed political organizations have exposed long-standing operations in the country.It is within this context that corporations recognize the need for greater CSR approaches and strategies.According to two prominent business leaders in the Philippines: “Corporate Citizenship is not an option but an obligation to humanize the free market system and give it a measure of social responsibility. Helping the poor help themselves is the most effective, sustainable approach to reducing poverty, releasing human potential and achieving better socio-economic equity.” — Andres Soriano III98 Juan Miguel Luz, Corporate Social Responsibility in the Global Community: A View From The Ground: Building Partnerships ForDevelopment, 2000.9 A Quarter of a Century in Social Development, Philippine Business for Social Progress, 1995. 39

“The members of the corporate sector possess the resources and the management expertise and organization to respond to the challenge. They will likely benefit from the windfall of sustained economic growth if the gap between the rich and the poor is narrowed. It is their businesses that will make use of the country’s larger consumer base and its greater disposable income. If the corporate sector was conscious of its social obligations and the benefits it would reap by addressing our country’s social issues, it can be a major force of development.” — Washington Sycip10Market forces have become a major driver, however, in the past fifteen years or so and with it the ideaof best practices was tied to distinctly CSR behavior. From the idea of best practices arose the notionof benchmarks that could be viewed as “collective best practices” impacting industry practices. Withthe entry of societal demand as a driver for CSR behavior, the envelope has been expanded and withit the necessary thinking of CSR as strategy.11b. Government as External Agent of BCRAccording to Luz, the Philippine government frames the policy environment in which businesses conductthemselves. Although Philippine companies engaged in BCR have had different motivations fordoing so, the Philippine BCR experience shows that companies engage with government whetherthey intend to or not. This is because both national and local governments design a number ofdevelopment programs, usually focused on special interest groups, wherein the involvement of theprivate sector should be an integral component because of its capacity to sponsor or serve as fundingsource.It is clear, however, that most of these programs look at the private sector either as resource provider or aspotential violator not only of laws but of community and individual rights. For those companies withpurely profit motives, government becomes the most appropriate intermediary because of its moral andlegal authority. Even in one case where business dealt directly with the community (for profit), governmentwas supporting the engagement through the community, albeit from backstage.10 Our Legacy, Philippine Business for Social Progress, 2000.11 Juan Miguel Luz, Corporate Social Responsibility in the Global Community: A View From The Ground: Building Partnerships ForDevelopment, 2000.40

EBCR Philippine Country ReportWhere corporations are more developmental, government not only provides the enabling policyenvironment but also the capability for both business and community to engage. In these casesgovernment provides the environment for companies to seek on their own the means to deepen theirrelationship with communities.The government promotes CSR because it is mandated to improve the living conditions of theconstituents. The government taps or partners with businesses to deliver development programs thataddress community needs. The government issues policies and regulations to encourage businessesto do CSR activities and also to compel them to protect communities (i.e., environmental laws).Incentives have been used by the government to influence business behavior toward activities thatare deemed to have positive economic benefits. Government initiatives are directed at incomegeneration, enterprise development, or environmental protection.In summary, the government’s major driver for facilitating or supporting these CSR engagements is itsmandate to serve the primary constituency, the community, and raise them out of poverty. The additionalresources obtained from the private sector allow the government to more effectively carry out its mandate.Additional revenue and economic activity are a greater driver for the provincial, regional and nationalgovernments.c. Societal Demand as Articulated by Civil Society as Driver of BCRCivil society started as a watchdog of government performance in public service. As local, regional,and national governments failed to deliver appropriate services in certain areas, many civil societyorganizations launched programs as alternative solutions. Today, many NGOs in the Philippines areinvolved in a wide range of public service delivery — health, education, micro-enterprises, cooperativesdevelopment, etc. As civil society organizations have institutionalized themselves into non-profitorganizations, companies have recognized that they too can be involved in similar areas where theycan share not only their financial resources but also their managerial expertise. Thus evolved theirhigher level of engagement in CSR.A major consideration for communities in engaging in CSR is how drastically the activities willchange their way of lives. Community people easily buy into activities that will improve theirsocial conditions and their communities such as the establishment of education and health centers.Businesses are moved to engage with communities as an aspect of reputation management andcorporate citizenship. As communities become more self-reliant, the cost of further engagementdecreases over time. This means that as communities become more empowered, businesseswould be able to minimize costly philanthropic activities and engage with communities on morebusiness-oriented terms. 41

d. Corporate Interests as DriversAccording to Luz, BCR is internally driven by individual managerial behavior — that BCR is an expressionof an “enlightened self interest.” Increasingly, however, leadership companies have seen the importance ofoperational efficiencies as the driver for BCR and very few have taken this further to the level of strategy.Luz added that an understanding of what drives change in BCR behavior can be derived on at least threelevels: • If regulation were the primary driver, then the BCR effort is significant only up to the level of compliance – paying the mandated minimum wages, paying the right taxes, complying with the letter of the law. • If individual behavior were the driver, then BCR conforms with the individual’s view of what constitutes integrity as far as responsible management is concerned. • In most cases and in most companies, external demands are the driver. Reaction or response about this aspect has been limited. Over time, however, prescient business leaders have looked to the internal drivers as a way to take control over such external factors and to be proactive in their approach to BCR.1212 Ibid.42

EBCR Philippine Country Report3. Emerging Models of BCRThere are three emerging models of BCR in the Philippines: Systems Thinking Model, Business ExcellenceModel and Business Case Model.a. Systems Thinking ModelAs an expression of corporate social responsibility, business-community relations has been a “professional”practice in the Philippines since the mid-1980s (although some companies with company towns havebeen known to do it since the turn of the 20th century mostly to take care of its personnel).In the early 1990s, a call for industry community relations standards led to the formation of theNational League of Community Relations Practitioners (NLCRP).13 In 1997, PBSP and NLCRP produceda systematic framework of “comrel” practice that takes into account the unique role of “comrel”practitioners as mediators between their companies and communities. It was the first attempt toprofessionalize the practice through the installation of systems thinking. The developed framework(see Figure 4) takes both inward (i.e., management) and outward (i.e. community) perspectives. Theentries located within the diamond denote the higher option that “comrel” practitioners can take andthose pointing outward as the minor options that can be taken.The major limitation of this model is the implication that only management can decide how it canvalue a community, and that “comrel” practitioners must find a way for their activities to be alignedto business in order to ensure sustainable support. It does not seek to explain how a community isvalued by a company, or what influences business strategy. More importantly, it fails to show what,how and who influences business strategy, such as how external players can stipulate necessaryelements of an operation, thereby directly influencing business strategy.13 Juan Miguel Luz, A Handbook for Community Relations Managers, Philippine Business for Social Progress, 1997. 43

Figure 4: Framework of Community Relations vs. Communities and Company Management14 PART of Business Strategy NOT Part of Business Strategy Comrel unit as an “Agent” “Personal emissary”Relatively Autonomous Strongly Aligned for the company Comrel unit serves to carry out management’s Organizational Relationship wishes Creates new Comrel vehicle role for comrel for a new vision for within mainline business the company Innovator Comrel to be Pathfinder/ (New assumptions Breaking new ground to the business) (New models, new Comrel theories) stretches Business so far from mainline Ad hoc/ (potential conflicts with Reactionary comrel mainliners) PART of Business Strategy NOT Part of Business Strategy Business considerations Treated as a special overshadow Comrel project (could be Stakeholder Relationship with the Community considerations isolated from Major mainstream) Non-business Access to considerations important resources + mutual benefit for company as a whole Stakeholder/Public Favorable results make community a major Ad hoc program/projects NOT Major public (maybe important to individuals but not to company as Business an organization) overrides community-relations 14 Juan Miguel Luz, A Handbook for Community Relations Managers, Philippine Business for Social Progress, 1997. 44

EBCR Philippine Country Reportb. Business Excellence ModelRealizing that “comrel” is actually part of a larger stakeholder engagement practice by business, severalmodels have surfaced that attempt to put a systematic face on this aspect. The European Foundation forQuality Management (EFQM) and British Quality Foundation (BQF) Business Excellence Model (See Figure5: The Business Excellence Model) integrates a company’s impact on society as a key element of businessprocess, and it is a widely recognized quality standard. It is consistent with quality principles ofenvironmental and social performance - criteria springing from the concept of Triple Bottom Line.15 Figure 5: The Business Excellence Model Leadership People Processes People Business Management Satisfaction Results Policy & Customer Strategy Satisfaction Impact on Resources Society 3 Enablers 43 Results 4Business ResultsThe Business Excellence Model is a tangible framework for assessing the degree of excellence in anorganization. It contains nine elements (referents) identified as key components of business excellenceand served as basis for giving quality awards in Europe. In the Philippines, such model is used to awardthose who comply with industry standards such as environmental standards, ISO 9001, etc.15 Triple Bottom Line is the sustainability concept (i.e., economic profitability, social equity and environmental sustainability)promoted by SustainAbility and John Elkington. 45

Business Excellence Model Process Stage Quality Principles referentsEnablers Leadership Policy & Issue Identification Core corporate values & Strategy policies Completeness People Management Stakeholder Resources consultation Inclusiveness Dialogue Processes Management & Information systems Integration & Embeddedness EvolutionResults People Satisfaction Measurement Customer Satisfaction Quantitative & qualitative Impact on Society Comparability Business results Differentiation Innovation & Developing action Learning plans Continuous improvement Business Results Reporting External verificationThe limitation of the model is that it encourages compartmentalized thinking,16 even though themodel was meant to be integrative. “Compartmentalization” is still a prevalent practice where structuredorganizations are necessary in order for business to actually function. As more and more aspects of businesseither are sourced from or become exposed to communities, it becomes apparent that stakeholderengagement is something that must be integrated into several aspects of business. This means that as abusiness function, community relations can be a tool in various aspects of business operations, regardlessof sector or industry.16 Business in the Community, Business in Society: Assessing the Impact, 1998. p. 2246

EBCR Philippine Country Reportc. The Business Case ModelBusinesses in post-World War II Philippines operated under the vacillating influence of both laissez-faire market-capitalism and the welfare state.17 Social responsibility was heavily influenced by otherinstitutions as well, such as the Roman Catholic Church and the extended family. As such, the BCRorientation of businesses and governments were in line with capitalist and welfare state paradigms.These CSR paradigms placed greater emphasis on impacts to society and placed little relevance to impactson business or the business case. Surprisingly, the actual improvements of these activities to society hadnot been fully explored. This deficiency of strategy and accountability of all stakeholders involved hasentrenched a view in business that social responsibility is, at times, an expendable cost center. Theimpetus for business activity is results, whereas most other stakeholders such as government and civilsociety are more driven by the motivation behind those results. Strategies that accommodate both driverscould be more effective in defining social responsibility roles.As the margins of engagement move from mere regulatory compliance to a highly proactive developmentalstance, business is also in a position to demand from other sectors delineation in roles. One of the keyfactors in community development that meshes well with the benefits-orientation of business is theasset-based community development (ABCD) approach. The key feature of the ABCD approach is thatcommunities drive the process of development through the identification and mobilization of often-unrecognized social assets. The objection its developers have over needs-based development (which is theprevalent practice of governments, civil society and business) is that needs-based development createsdependency — a donor-benefactor relationship — between developers and impoverished communities. Inessence, the ABCD approach inherently looks at communities as stakeholders and partners for their owndevelopment where corporate-community partnerships can be forged. With this approach, resource-strapped government and dependency-wary business can engage communities knowing that it would bebeneficial to all involved.The integral power of government lies in its ability to wield prescriptive policies that no business cansuccessfully ignore in the long term. These prescriptions provide an environmental framework for businessesto act in a community, for socially responsible corporate behavior. Many contest these regulatory optionsas contrary to the voluntary nature of corporate citizenship, thus minimizing the effectiveness of corporatecitizenship as a competitive strategy. However, regulation is still one of the most effective options grantedto communities and civil society in the developing world for the universal implementation of appropriatedevelopment practices.17 David Logan, Global Corporate Citizenship-Rationale and Strategies, 1997. 47

Previously such regulatory sanctions were considered as additional costs to business in developingcountries. However, as corporate citizenship becomes a standard for competitiveness in developedcountries, it becomes clear that it is also within the government’s mandate to promote and ensureresponsible business behavior in the country (ergo, citizenship). For example, the United Kingdom isthe first country in the world that has a Department of Corporate Social Responsibility lodged in itsMinistry of Trade & Industry.As the world of business grapples with issues of sustainability and how it could possibly impact thebottom line, government and civil society are developing means of quantifying impacts that previouslyhad only been noted as “smiles in glossy pictures.” SustainAbility has pioneered the concept of the TripleBottom Line, where business does not only have an economic bottom line, but also social and environmentalbottom lines. This has precipitated the concept of the “business case” for social involvement and as amovement it is gaining momentum worldwide, as exemplified by the UN’s Global Compact. This trendprovides the direction for governments and civil society to work with the private sector. (It is not thepurpose of this section to provide a comprehensive guide for developments in corporate citizenship, butonly to highlight specific developments that directly relate with and affect the cases in focus.)As the corporate citizenship movement progresses alongside enhanced community development andglobalization, it is safe to assume that business-community relations can become equitable partnershipsthrough changes not only within business, but also within the community, government and civil society.4. Quality of Stakeholders EngagementBesides the emerging models of BCR, there are two other models of engaging with BCR stakeholders.These two models are the partnership strategy model and the stakeholders relations model.a. Partnership Strategy ModelThe partnership strategy is considered the most “evolved” paradigm for engagement as it is founded onmutual respect, understanding and agreement as well as equitable (as opposed to equal) sharing of benefitsand risks among all players, including business. It stands as the most effective means of ensuringdevelopment since it encourages ownership and commitment among all partners. In an environmentwhere these aspects are not present and cannot be introduced (for instance, where there are unresolvedideological conflicts), a partnership may not immediately ensue but can develop and emerge once conflicts48

EBCR Philippine Country Reportare resolved. In an environment where these aspects are lacking but can be acquired, building thecapacities of all potential partners to equitably share risks becomes part of the partnership strategy.Institutional partnerships claim broad gains. However, specific gains that would serve as impetus forbusiness to be involved are often identified as merely “the potential to earn alternative attractivereturns on their investment.”18 It is left solely to business to identify gains from the partnership,but, more often than not, business is not expected to seek returns in the quantifiable manner that itis used to.Multi-sectoral, also known as tri-sectoral, partnerships in development often refer to the confluencebetween business, the public sector and civil society, and are designed to solve particular problems. Thisis also known as a convergence of primary stakes. The chart below (Figure 6: Tripartite Partnership) showsa non-exhaustive list of specific kinds of stakeholders within these groupings.19 Figure 6: Tripartite Partnership Tripartite Partnerships* * Symbol taken from the PPPUE diagram on partnerships, stakeholder types from Guiding Hand Government Business National Government, Federal States, National and International Formal & Municipalities, Educational/ Informal Enterprises, Business Academic Institutions, International Associations, Enterprise Dev’t. agencies, National & Local Agencies, Financial Institutions, Governments, Public Sector services, International companies, Joint stock QUANGOS (quasi-autonomous non- companies, National Companies, governmental organizations SMMEs (Small, Medium & Micro Enterprises) Civil Society Communities, Research Centres, Educational/ Academic Institutions, Campaign groups, Community- based organizations, Donor agencies, Labor organizations, NGOs, Private voluntary organizations, Religious institutions18 Public-Private Partnerships for the Urban Environment (PPPUE) Facility Brochure, 200019 Tennyson, R. and Wilde, L. THE GUIDING HAND: Brokering partnerships for sustainable development. United Nations StaffCollege and The Prince of Wales Business Leaders Forum, 2000. Symbol from the PPPUE Facility. 49

Yet “partnership” has become a highly abused term. Any form of multi-sector engagement hascome to be labeled a partnership despite the lack (or ill-preparation) of mutually and equitablyagreed upon aspects like benefits and risks. (See Figure 7: Social Engagement Framework) Figure 7: Social Engagement Framework Business Partnerships State Civil Society Community/ Societyb. The Stakeholders Relations ModelThe term “stakeholders” has generally come to mean parties that would either be impacted or have animpact on a particular activity and/or party. This implies that stakeholders are not just parties that canaffect one activity or party, but can also be impacted on. This dichotomy gives rise to the argument thatthe term “stakeholders” is only a politically correct label for a beneficiary. The new term denotes thatparties included or involved in an activity are recognized as co-equal in participation and decision-making,risks and benefits, despite unequal resource endowments.Stakeholders impact each other, often in ways that may not be captured as a primary stake (with referenceto an agenda) in a partnership. The implication is that there is a larger basis for the partnership aside fromthe confluence of primary stakes. Operationally not all these impacts will set the basis for partnership,hence the persistence of the beneficiary approach. However, this does not mean that this “larger basis”will not affect the partnership.Often, when business and public sector-led partnerships take a beneficiary approach to partnerships, theydo so because of the perceived high costs of instituting and maintaining a genuine stakeholder approach,50

EBCR Philippine Country Reportespecially in relation to localized partnerships with a capability-building focus. Many of these kindsof partnerships have successfully obtained their identified objectives. When a benefactor outlook isupheld (i.e. no equitable sharing of benefits and risks with target groups), the terms of success arebased primarily on the benefactor.As business sees and values the overarching commonality between it and other social players, itbecomes open to the concept of equity among stakeholders. It will then not only see gain for thefinancial bottom line, it also recognizes other gains as well. These gains become the basis of thebusiness case for CSR. The recognition and valuation of benefits not traditionally associated withbusiness — but are naturally recognized by other sectors towards the pursuit of traditional benefits —become the basis for development partnership. When these other gains are valued and proactivelypursued without concern for profit or gain, business may become an appropriate agent/partner in avolunteering effort.This paradigm entails that a collaborative and supportive view is maintained by other stakeholders as well.Without such an environment, the volunteer partnership is not sustainable. Therefore, each stakeholderbecomes responsible for maintaining a collaborative and supportive view for and of each other. Volunteerismmay be employed by any stakeholder towards the maintenance of such a relationship/partnership.The chart below (Figure 8: Ann Svendsen’s Corporate Stakeholder Relations Model) shows both internaland external stakeholders of businesses. Figure 8: Ann Svendsen’s Corporate Stakeholder Relations Model EXTERNAL Socio-Cultural 4Environment Context Capital Stakeholder 6 4 Contracts 4 Capital Stakeholder Social 4 Strategy 4 Profit Intellectual 4 Capital INTERNAL Business Corporate 4 Practices Values Finance 4 Capital 51

This model shows that community relations can and is invariably performed by anyone within acompany. This brings into play the overall cultures and values of the company - whether it encouragespartnership and actual stakeholder relations with others. This necessitates that without this “internalcompass” - in itself a mark of competitive business excellence - companies have to be driven torecognize communities as stakeholders either by the communities themselves or by other entities.5. Volunteerism as a Key Component of BCRSince 1962 volunteerism has been recognized by the community of nations as a tool for socio-economic development.In the Philippines, volunteerism evolved from the Filipino’s cultural tradition called “bayanihan”(mutual help effort, support and assistance) into a community-based development strategy. Organizedvolunteer service began with the creation of Philippine National Service Committee on December 17,1964 through Executive Order No. 134. The Committee became the Philippine National VolunteerService and Coordinating Agency (PNVSCA) in 1980.Volunteerism is defined generally as extending personal services without compulsion and monetarycompensation. Perceived as a tool for development, volunteerism has been covered by a PresidentialProclamation declaring every December 5th of the year as International Volunteer Day for Economic andSocial development in the Philippines.20In the light of worldwide economic slowdown, corporate volunteerism was promoted in 2000(International Year of Volunteers) to make a positive impact on society by sharing the business sectors’most precious resource — people.Current literature categorizes the benefits of volunteering as related to (1) the development ofemployees and (2) reputation-capital building. However, collective experience has shown that differentkinds of volunteering activity generate different business results. Basic volunteering services byemployees or through employee activities offer opportunity for the company to build its reputationand for the employees to build their team. Volunteer activities that are done in group or withcollaboration or participation (e.g., participation or formation of voluntary dialogue groups) have anadded business benefit — risk management. As companies move towards advocacy-related work thatare part of their business and serve a broader social need, the benefits include sustained socialcapital and more concrete reputation build-up not only with communities but with other sectors likegovernment, religious organizations, academe, and civil society.20 Current Trends in Volunteerism, Philippine National Volunteer Service and Coordinating Agency, 2000.52

EBCR Philippine Country Reporta. PBSP’s Efforts in Corporate VolunteeringPBSP has responded to the need to promote volunteerism through the implementation of the LinkingWorlds Corporate Volunteering Program. PBSP matches corporate volunteers with non-profit organizationsthat need particular expertise. Linking Worlds has also designed training modules that can be made availableto participating companies to develop/strengthen their own volunteering programs. A partnershipwith the Canadian Executive Service Organization (CESO) has been entered into for the developmentof a secondment program entitled Corporate Volunteers for Enterprise Development (CVED). TheCVED services small and medium-sized enterprises (SMEs). The peer or business-to-business mentoringmethod is also being used for increasing awareness and practice of environmental management inSMEs. The same methodology is being developed in Southern Philippines for Muslim SMEs whichhave limited access to updated operational and management technologies because of conflict issues.The Philippines, through PBSP, is now a partner in the global ENGAGE campaign with the Prince ofWales International Business Leaders Forum (IBLF). Though relatively new to systemized employeevolunteering when compared with other countries, the campaign aims to support and disseminatethe volunteering technologies developed by PBSP within the Philippines and the Southeast Asianregion.Corporate foundations, seeing volunteerism as part of their function to promote new trends in corporatecitizenship, are developing and promoting employee volunteering within their own member corporations.This is a parallel development to the growing movement in the Philippines for individual volunteering viathe growth of the civil society (voluntary) sector and the entry of such volunteering organizations asUnited Way and Hands On Manila. The growth of such groups was significantly felt following the September11 attacks.b. Concerns and Challenges Mainstreaming Volunteering vs. Ad Hoc. The alignment to the business goals provides the sustainability for the activity, yet some contend such advocacy is still akin to self-interested lobbying. It is clear that there is a need to enrich the discourse on this aspect of volunteerism in order for more companies to learn how to support the volunteering that their employees might do, whether or not this is done under the corporation’s CSR. 53

Volunteering Time. For companies just starting their volunteering programs (i.e., one year and less), the concern has been how to balance volunteering time with the 24/7 demand of their company operations. As a result, most of their initial volunteering activities are seemingly ad hoc. On the other hand, the experience of the companies that have been engaged in volunteering programs for some time is that, in order for volunteerism to be practiced, a company must first and foremost be engaged in CSR. Advocacy. Companies give special attention to their CSR activities that employ legal frameworks to address broader issues. This brings to light an important voluntary function that is usually not considered an activity of corporate volunteering: advocacy. It is not only a situation in which the employees or management contribute expertise and other resources towards identified issues. Through corporate advocacy, companies also employ worker volunteers and inspire other sectors into action, especially communities who are not equally motivated for lack of knowledge. A case in point is Figaro’s promotion of Liberica (Barako) bean. (please see pp. 127-133.) Popularizing Volunteering Practice. There is also a distinct challenge in communicating to companies without social or developmental affiliations the technology of volunteering, especially when most of Philippine companies fall in the SME category. (The results of the 2000 Corporate Citizenship survey of PBSP showed that small and medium enterprises are more inclined to express their CSR through volunteering as it does not require outright cash outlay or expense.21) Individual Volunteering and Volunteering Organizations. Another challenge is the perception of communities themselves that companies are financial resource providers. Thus, there is somewhat limited demand in the communities for employee volunteers. Traditionally, the provision of basic services through volunteering by individuals had nearly always been fulfilled by either government or civil society and given the strong civil society in the Philippines, employee volunteering in these areas might be considered a form of competition. The emergence of volunteering organizations has increased the opportunity for individual volunteering, which unless properly addressed could be used as an excuse for companies not to get involved in volunteering. Sharing of Expertise. One form that has yet to be tapped and can still be developed is the sharing of expertise. Only a handful of employees and companies are engaged in giving pro-bono services, much less mentoring or secondment to non-profit organizations. This may be primarily due again to the lack of time employees have, especially during the last five years, the time of the Asian financial crisis. During this time some companies21 The Heart of Business: Profiles in CSR, Philippine Business for Social Progress, 2000. 54

EBCR Philippine Country Report streamlined or consolidated their operations and a number cut down their personnel. Employees who did stay had were multi-tasking and possibly spent additional time during weekdays for work, which resulted in time away from the family. Some challenges for companies and employees at this point are: (1) making a stronger case for release time, and (2) melding professional as well as personal goals into the activities, whether outreach or sharing of expertise. Measuring the contribution and the impact of these activities to company goals — particularly the human resource goals — would help make a stronger case for release time. Project Management. Although still minimal, the emergence of another form of involvement – project management – means greater recognition of the benefits companies and employees may derive from the endeavor. Record Systems. Another challenge for companies is coming up with record systems that would somehow capture these data but at the same time keep the “voluntary and charitable” nature of these activities. These may be used to leverage corporate contributions. Furthermore, costs of man-hours spent may be used for tax exemption purposes both at the company and individual levels. Systems Installation. Aside from record systems, companies may do well to put in place systems or integrate volunteering activities in their existing systems, particularly project identification, resource mobilization, volunteer management, monitoring and evaluation systems. These will allow companies to make the activities more strategic and more aligned to business goals, thereby maximizing the benefits that can be derived from such activities. Lack of Policy. A greater challenge in promoting volunteerism in companies is the lack of policy regarding volunteerism itself, since this had always been assumed as work done for free (“gratis et amore”). This is reinforced by a mindset in Philippine civil society that volunteerism is usually cost-free commitment to a cause. The reassuring factor about Philippine business is that a good majority of corporations are willing to directly implement their corporate citizenship initiatives. However, they want a learning environment to do it in and they want to be shown how to go about their responsibility, given their limitations as businesses. So far, the latter role has been taken by other businesses and business- related organizations. Those that do not see themselves as direct implementers are willing to support creative means of volunteering that allow them to reap any of the rewards or benefits of volunteering. 55

B. BUSINESS-COMMUNITY RELATIONS IN THE PHILIPPINES:ACTION RESEARCH FINDINGSIn order to validate the findings of the desk review, five research studies conducted by PBSP wereused in the action research. These are: 1. The Scoping Research on Corporate-Community Engagements and on Government Facilitated Business Community Relations 2. The Survey on Correlation of Fiscal Incentives and Socially Responsible Corporate Behavior 3. The PBSP Benchmarking Corporate Citizenship Impact Assessment Tool 4. The American Chamber of Commerce and PBSP Survey on Volunteerism 5. Case Study Research.The “Meeting of the Minds” Session of the First Asian Forum on CSR in July 2002 in Manila and theRoundtable Discussion on “Enhancing BCR: The Role of Volunteers in Promoting Global Corporate Citizenship”in September 2003 in Makati City, Metropolitan Manila, were used as interactive sessions to validatefindings and also add new information to the research studies.1. Survey and Scoping Research FindingsThe findings of the researches showed that there are changes in the roles, strategies and approachesused by major stakeholders — businesses, government, civil society and volunteers — in pursuingBCR. Significant changes are in the areas of: motivation in engaging BCR, governmentexpectations, and perspectives of business and civil society about BCR. These are briefly discussedbelow.a. Changes in Motivations to Facilitate BCRThe role of private foundations in social development has been acknowledged as early as 1906 in Philippinelaw. However, it was during the administration of Corazon C. Aquino that they were given renewedrecognition.Section 23 of Article II of the 1987 Philippine Constitution states that “the State shall encourageNGOs, community-based or sectoral organizations to promote the welfare of the nation.” Specificallyreferring to BCR, Section 11 of Article XIV ensures that “Congress may provide for incentives, including56

EBCR Philippine Country Reporttax deductions, to encourage participation in programs of basic and applied scientific research.”Thus, corporations can take avail themselves of the following incentives: - either limited or full deductibility of contributions or gifts for income tax purposes under Section 29(h) of the Tax Code; - Exemption from the estate tax under Section 80(d) of the Tax Code, and - Exemption from the donor’s tax under Section 94(a)(3) of the Tax Code.Incentives had been used as the main instrument to promote investments, specially capital investmentsor foreign direct investments (FDI). Some quarters in the business sector, however, had expressed that theuse of incentives would only create an environment that delimits voluntary action. Also, no study hadbeen done so far to determine how existing incentives and regulations had promoted BCR.In response, PBSP conducted a survey on the correlation of fiscal incentives and socially responsiblecorporate behavior of companies registered in the Board of Investments (BOI) for incentives from 1996-2000. The survey aimed to determine the strength of the relationship between various kinds of fiscalincentives and socially responsible corporate behavior towards communities, in the context of economicshocks. The study targeted registered pre-operating and operating firms as identified by the InvestmentPriorities Plan (IPP) of years 1996 to 2000. The study only looked at companies that availed themselves ofnational-level incentives. Out of the 89 questionnaires sent, 13 (14.6% of sample) responses and 14outright refusals were received.While not statistically significant, the survey results indicated that most of the 13 companies (i.e.,the company respondents are small and medium enterprises and are part of the new investmentpromotion of the government; located in economic processing zones) that responded did not viewtheir community affairs as a move toward reputation-building; and compliance with investment lawsand costs had little to do with their BCR priorities. This could be partially explained by the fact thatthe monitoring (done by the company and by external parties) of the impact of the incentives theyavailed themselves of was limited to the financial aspect. For example, though the EnvironmentalCompliance Certificate (ECC) is one of the most common strict requirements, environmentalrequirements monitoring by the incentives agency is not as strict as the financial monitoring done.It was perceived that the companies gain substantial tax savings considering that the most popularand significant incentive is the income tax holiday (ITH). This was how the respondent companiesdescribed the impact incentives had on their operations. The data implied that finance and legaldepartments were the organization units most concerned with monitoring the incentive most probably 57

due to the impression that incentives mitigate operating or overall costs. Although there werestrong indications that incentive application was also part of medium/long term plans, corporateplanning did not have as much say on how the “bounty” of incentives were used. It could be gleanedhow vaguely social responsibility was perceived as a business issue. Only a margin of the companiesused a percentage of their ITH savings for BCR activities, with most of them stating that BCR isimplemented within a fixed amount.Asked about how incentives impacted the company, most of the respondents did not answer or answeredin the negative. This could show that internally these companies were not aware of the significance of thetax savings, even possibly classifying them merely as cost savings. The responses that ITH, which is labeledcost savings, both encourages and discourages CSR behavior, implies the lack of awareness of BOI-registeredcompanies about BCR being more than a channel of donation to communities.A disturbing conclusion that could be drawn from the research is this: despite the fact that CSR is a value-driven business agenda, the respondent companies do not have fully developed policies or guidelines onconducting and developing BCR. The survey conducted also showed that, on top of not having any writtenBCR policy, most of the respondent companies would embark on workplace and community programswithout first checking on government incentives.In conclusion, the survey revealed that despite the policy provisions for BCR, very few companies havetaken advantage of incentives. But then, in one way, this is heartening information, because it proves thatmotivation to implement BCR should not be limited to policy incentives or should not hinge on monetarygains.b. Changes in Expectations Toward GovernmentThe survey revealed that the government is expected to formulate policies that would compel companiesto implement BCR programs. The survey showed a greater need for government to not only focus onpromoting incentives as a cost reduction scheme, but rather concentrate on the particular activitiesthat the incentives are trying to encourage that would eventually redound to mutual benefits for allparties.Incentives alone cannot require companies to conduct CSR. One reason is that these incentives aretied up with other laws, such as the Clean Air Act of 1999 (Republic Act 8749) and the Agriculture &Fisheries Modernization Act (Republic Act 8435). The Environmental Compliance Certificate (ECC) isa requirement for all activities that are considered to have environmental implications, and therespondent companies showed awareness that compliance to it is one condition to be registered for58

EBCR Philippine Country Reportincentives. Companies not covered by the ECC are still required to file a certificate of non-coverage.While the companies that responded to the survey recognized the importance of strong linkagesbetween granting agencies and agencies that monitor particular sectors, they believed that therewas no entity monitoring their relationships with the communities and/or their supply chain.Different industries and sectors have different requirements depending on the standing BOI policy and theregulatory framework for the concerned sector. This means that some industries would appear to have“fewer requirements” while others would have a very long list. However, there are circumstances whencompanies in some financial strait are “allowed” not to comply with all the requirements of their incentives.This permitted non-compliance goes with community relations and environmental sanctions.Responses to the survey also showed some weakness in monitoring within companies themselves. Theowners or finance department heads of the respondent companies acknowledged that they supervised themonitoring. Yet almost half of the respondents chose not to respond when asked about the effectivenessof their monitoring activities. The majority noted a sense of immunity towards civil society influence; thiscould be explained by the fact that most company respondents are wholly Filipino, SME-size corporationsoriented towards the domestic market.The survey thus validates the desk review findings that owing to their mandate, the government cancompel corporations to do BCR through policies and regulations that promote social good.c. Changes in Corporate BCR PerspectivesBased on the survey, BCR activities and priorities of respondents showed a strong philanthropic bent,and the most common BCR choices were traditionally considered non-strategic to business goals, e.g.,civic and community affairs, and religious activities.It was noted that most companies put premium upon local government units (LGUs), clients, andcommunity as these were considered external stakeholders. The respondent companies consideredtheir shareholders and employees as internal stakeholders. Although some respondents rated CEOpreferences and community needs as top priority, a good number also indicated that CSR activitiesmust be aligned to the local government unit (LGU) development plans.The survey showed that current BCR placed greater emphasis on impacts on society and placed littlerelevance to impacts on business or the business case. This indicated a deficiency of strategy and 59

accountability of all stakeholders and entrenched a view in business that social responsibility is anexpendable cost center.d. Changes in VolunteerismThe AmCham Foundation and the PBSP conducted an exploratory survey22 from late December 1999to February 2000 on the prevalence of and the corporate environment for employee involvement inthe country. The survey was the first attempt to organize data on the matter of employee involvementin BCR. The preliminary survey was sent to 528 member companies of AmCham and PBSP. The surveyyielded 115 respondents, or 22% response rate. Significant findings were:Sixty-five companies (57%) indicated presence of employee involvement activities in their companieswhile 50 companies (43%) had no activities at all.The survey showed that corporate volunteerism in the Philippines is strong and thrives in small to largecorporations, in wholly Filipino as well as multinational organizations, and in almost all industry sectors.Although sporadic and seasonal, Filipino employees tend to give to causes their time, skills, and most of allresources, in cash and in kind. Some had even gone to the extent of doing their own fund-raising activitiesto complement resources raised among them (particularly financial resources). Outreach activities havealso become a common activity. One out of two companies had conducted at least one outreach in thelast three years. Respondents said that they would have wanted to do more if only they had more time.The study also showed that a formal written policy is not really a consideration for undertaking BCR-oriented activities. Even without a policy employees would be willing to involve themselves in somekind of BCR activity.Employing the PBSP Benchmarking Corporate Citizenship Impact Assessment tool, these findingscontributed to the study:Some companies had a hard time acknowledging the benefits that volunteering had for the company.Upon further reflection others noted that the benefits were immediately given and were monetary innature. The companies generally agreed that volunteerism as a concept complements their socialresponsibility, and was not contradictory to the organizations’ profit purpose because the organizationsalso possessed non-profit values.Information gathered from the Scoping interviews validated the benefits of volunteering mentionedin the desk review, namely (1) the development of employees, and (2) reputation capital building.22 The Center for the Study of Philanthropy, City University of New York. Employee Involvement in the Philippines 2000. Writtenby City University of New York, American Chamber Foundation and Philippine Business for Social Progress.60

EBCR Philippine Country ReportThe highest ratings were given to benefits related to positive contribution to value chain (part of corebusiness), public response to CSR projects (corporate reputation), risk management and sustainable build-up of social capital.There were also good ratings for improved perception towards business environment and staff and linefunctions.In the preliminary findings of the Benchmarking Corporate Citizenship study, some of these areas werealso found significant for the corporate citizenship themes of social investment and corporate-communitypartnership.2. Findings from Case StudiesThe case studies were developed to present the BCR experiences of the member companies of PBSP. Thesecases highlighted the volunteering practices of companies and their employees.a. On Emerging BCR Models and Strategies of EngagementThe case studies developed by PBSP under the EBCR Project revealed changes in BCR perspectives. 1. The most significant change is that BCR is now moving from corporate philanthropy to the business case model (i.e., mainstream BCR as a business agenda and strategy). 2. The cases showed that the notion of partnership through convergence is frequently and extensively employed by the companies under study. Partnership is characterized as having mutual respect, understanding and agreement, as well as equitable sharing of benefits and risks among all players. It is an effective means of ensuring development as it ensures ownership and commitment among all partners. Convergence is a form of partnership that is reshaping the way governments govern, how corporations conduct their business, and how people participate in their own governance. Convergence of interests, convergence of technology, and convergence of things that are local, national and global are prevalent types of partnership among government, corporations, civil society and communities 61

3. All the companies in the cases have vision and mission statements expressing clearly their contribution to society or communities. The companies studied in the cases described their BCR efforts as ranging from seeing community and social involvement as a reflection of the corporation’s industrial leadership position to fulfilling responsibilities and complying with laws. 4. In all of these companies, a culture characterized by initiative and value for people was mentioned. Many stated that theirs is a learning culture, and in many ways their perception of organizational culture is also a “work in progress”. (The values and policies relating to corporate citizenship are in many ways integrated into the organizational culture.) For some companies, there were straightforward statements that theirs is an organizational culture that values the community as a stakeholder and responds quickly to requests made by external communities. 5. Companies in the study placed value on the communities (geographic and sectoral) depending on their business strategic plans and priorities. They defined priority stakeholders as well, depending on the impact the business has on these communities, and vice versa, on the companies’ overall value chain. The promotion of corporate values in these communities was perceived to be done through the actual community relations activities that the companies conduct. Feedback from communities on their social responsibility work was deemed integral to their efforts to keep improving their work process. In many respects the companies indicated a market-orientation toward their communities. 6. Communication strategies were considered extremely important. However, it was found that most people in the communities continue to perceive companies as resource providers and they could not see how the BCR activities related to the business – clearly a failure in communication. The companies in general admitted that they would refrain from “big- scale boasting” of values, yet were often called to do so especially during unique situations where the corporation seemed to be the only logical spokesperson for a particular issue. 7. Community Relations practices were highly diverse, ranging from adaptations from mother company programs (for multinationals) to localized social marketing campaigns. Activities ranged from community relations supported by employee volunteers to work done out of a sense of volunteerism.62

EBCR Philippine Country Report Most companies stated that they could distinguish which of their activities in communities they deemed to be their responsibility, such as those that have a legal framework, and those that were done voluntarily.8. The case studies also revealed that Philippine companies engaged in BCR are applying the business case (Please refer to the matrix below re: Case Studies.). The degree of application varied in terms of scope and magnitude, the level and number of stakeholders’ participation, and the approaches and mechanisms employed to implement the BCR. Let us take the case of Figaro Corporation, Nestle Philippines and CMC/Ramfoods/Kraft. These companies are engaged in contract growing of agricultural products that they utilize in their company production. This enables them to satisfy their input requirements and at the same time provide employment to Filipino farmers. Among the three, Nestle’s coverage and scope of implementing BCR is the widest (not just in Quezon but in other provinces) because it has the largest resources compared to the two companies. Nestle and CMC/Ramfoods/Kraft are considered partners in development by the government who initiated the partnership. On the other hand, Figaro’s motivation goes beyond company goals because it is trying to save the Philippine coffee industry through its contract growing efforts. Unlike the two companies, Figaro initiated an engagement with non-government organizations and, after being recognized by government because of its efforts, began to engage with the government. Unlike the two companies whose commitment to farmers may change depending on opportunities presented by the market (i.e., they may decide to tap foreign suppliers that offer cheaper prices), Figaro promotes patronage of Filipino products, showing commitment to support the country’s coffee raisers until they become self-sustaining by 2005. CEMEX Philippines and Silangan Mindanao Exploration Company are both into the compliance to environmental protection quality standards to prove that sustainable development can be achieved by companies who observe environment friendly operations and technology. CEMEX initiated the move, while Silangan’s action was government- initiated. Sun Microsystems and Davao Light and Power both used their expertise (area of specialization) to address their stakeholders’ social needs, in these cases, education and power. The first considers a bigger group of stakeholders (all users of IT are clients) while the other looks at the community where it is situated as its major stakeholder. Both have company-initiated BCR. The presence of La Frutera Corporation in a post-conflict area like Paglas proves somehow that business should come in first before peace can happen. Similar to Figaro that has set 63

up a foundation to do BCR, La Frutera organized its BCR unit that provides and manages its livelihood and social services to the community. Petron institutionalized its BCR through its Volunteerism in Action (VIA) Program and proved to its various stakeholders its commitment to social development when it implemented 14 development programs beginning in 2000. 9. The case studies showed that there is an emerging perspective that BCR should contribute to the empowerment of the people and should treat communities as not just mere beneficiaries but more so as stakeholders who have roles to play in BCR. The narrow view of stakeholder includes publics with whom the corporation has direct dealings with and with whom a relationship must be established and maintained. The broad view is includes groups whose interests may be congruent or would have impact on the corporation’s interests, and vice versa. This is not to say that everybody is a stakeholder – to include all is meaningless if no relationship is developed. But clearly, the stakeholder emphasis forces the corporation to define its major publics from a strategic point of view rather than a strictly technical one.23 The experiences of the various companies mentioned in the case studies showed that definitions of stakeholders vary in terms of scope and participation. For instance: Sun Microsystem, Nestle, and Figaro have defined their stakeholders as those that contribute to the development of an the industry they are in, information technology users and Philippine coffee growers. CEMEX, La Frutera, Davao Light and Power, and CMC/RAM/ Kraft considered as stakeholders the immediate communities where their business enterprises are located. Finally, Petron considers people in need of support as its stakeholders. 10. As the companies’ level of BCR intensified, the corporate mechanisms and approaches to BCR changed from mere ad hoc company units conducting piecemeal projects with a single sector in the community to a more institutionalized foundation or corporate units conducting integrated programs in partnership with various sectors at community, industry and country levels.b. On PBSP’s Experience as a Model BCR23 Juan Miguel Luz, Corporate Social Responsibility in the Global Community: A View From The Ground: Building Partnerships ForDevelopment, 2000.64

EBCR Philippine Country ReportThe case study on PBSP validates the desk review findings that PBSP has played a major role in thedevelopment and promotion of CSR in the country. 1. The distinct success and prestige PBSP has reached in social development work and corporate citizenship can be attributed largely to these factors: a. A working Board of Trustees whose members are prominent business leaders b. PBSP’s adoption of and successful mastery at integrating sound business and social development principles in the organization’s program development has brought together the best of these two principles. c. Having a “learning culture”, PBSP continuously reviews and improves its strategies and approaches. d. Existence of an effective and efficient staff development program. e. PBSP’s practice of the principles of “division of labor,” collective action, and purposeful partnership has enabled it to expand the range of its functions and activities and form a multitude of diverse partnerships to fulfill its mission. f. Having a sound financial condition has allowed PBSP to attract and leverage funding and other resources. 2. The CCC plays a very significant role in the CSR leadership-building process of PBSP. The significant milestones it had carved for CSR development and practice in over a decade of existence has put PBSP at par with global leadership in CSR organizations. 65

CASE STUDIES 66 Company Research Length Description of CSR activity Case Figaro Corporation (started BCR in S Advocacy to save the Philippine coffee industry Company affects supply by in 1993, fully Filipino- context of through the promotion of the Liberica (Barako) bean. consumer and supplier adv owned; started international Volunteerism CSR activities are targeted towards consumer stabilizes community incom franchising in 2000) advocacy linked with supply chain (farmers) industrial stability. Retail – specialty coffee promotion. Partnered with Coffee Foundation of the Philippines (CFP) to get free seedlings to farmers. Comrel activities are conducted through the CFP. The program started in 1999. Figaro envisions that the country’s coffee farmers must be self-sustaining by 2005 (lifting of quantitative measures due to WTO). La Frutera Corporation/ BCR in S Advocacy for diversity and peace in the workplace. Diversity in the workplace Paglas Corporation (sister context of Leadership of Datu Paglas played a key role in social misgivings. All work companies operating various Volunteerism instituting policies of tolerance and achievement that communities, thus compan aspects of the same led to the success of the company. community peace. These a plantation) as one, although communi by La Frutera. The case illu Plantation – bananas leadership. Sun Microsystems BCR in S Advocacy for bridging the digital divide through Efforts of Evangelist Team context of affordable education in IT, usage of open license School Teachers program ( IT Vendor Volunteerism software and mentorship of IT skills to teachers in through Youth volunteers schools. There is also the use of an “Evangelist Team”, Team). a core group of volunteers for a year and is serving as the pilot employee volunteering group. Their community is essentially the schools and youth groups that they have already reached out to. Davao Light & Power BCR in S The company is a PBSP member company, and has A lighting program (social Corporation context of already undertaken innovative CSR activities, most of with the city’s local govt. t Volunteerism which are aligned with the company’s main line of crime deterrent. The progr Power company business. The company uses volunteers in its in deterring crime, it also c programs, most notably the street lighting and police community tourism, expan computerization programs. improved agricultural outp 66

Company Research Length Description of CSR activity CaseCEMEX Philippines BCR in S The company has several community relations The company’s volunteerisCement context of activities that involve volunteers, particularly medical missions) and env Volunteerism computer education where the employees share building efforts (tree plant expertise. CEMEX is noted as one of the most advanced cement firms technologically worldwide. However, it is more noted locally for its efforts on environmental health and safety in and out of the company. ItPetron Volunteerism in BCR in L Petron employs volunteerism in all of its CSR The case focuses on the imAction (VIA) context of programs. Known as VIA (Volunteers in Action) the measurement system emp Volunteerism VIA is a system of matched volunteering that allows Petron to reach communities as part of its national coverage.Silangan Mindanao Govt BCR L Govt. facilitated community relations (Surigao del Angle will be on how MGBExploration Co. / Mines and Norte) between the Silangan Mindanao Exploration relationship of Philex and tGeosciences Bureau Co. (SMEC) and the baranggays of Timamana and San the CTWG, a voluntary com Isidro through the community technical working environmental watch grou group. The engaged is based on the legal requirement which is not yet required for SMEC as an exploration company (the Multi-partite Monitoring Team).Nestlé/various DTI offices, Govt BCR L Govt. facilitated community enterprises with Big Effectiveness of governme EBCR Philippine Country Reportmainly DTI Quezon company assistance. Both engagements are relationship between the cDTI Nueva Ecija / Govt BCR L essentially contract growing arrangements. the big companies. It is exCMC/RamFoods/ Kraft community enterprises woPhilippines the large companies, whilePBSP/CCC case study L CCC as an expression of voluntary commitment of Case focuses on the contex business leaders for social responsibility. Covers in developing countries an issues such governance, leadership, etc. processes and/or structureSelection of companies and engagements was not solely based on the “best-practice” approach, as it would limit the ability of the research to obtain a comprehensive pictureof the variance in practice. In some cases, both best and common practices are inherent yet most cases the difference is apparent. 67Based on the Research themes earlier presented, the cases were used as the base for thematic scoping research sub-studies as explained earlier. 67

c. On Corporate Volunteerism The Central Azucarera Don Pedro , Inc.The case studies revealed that a good number of CEOs (CADPI) integrated employeesbelieve that the practice of employee involvement is a involvement in its CSR efforts. Bothdemonstration of CSR. Not only does it help the company company and employees are ready tocontribute to improving a healthier environment and share their time and resources toenhancing relationship with communities and activities that will benefit theirgovernment, it also develops teamwork skills and boosts families, co-workers and communities.the morale of the employees. The company provides release time to employees involved in CSR activities. 1. Sharing of expertise was done by the employees It has institutionalized the automatic of Nestlé Philippines when they provided salary deduction of employees’ technical training to coffee growers. contribution to burial assistance to co- workers. 2. In Central Azucarera de Don Pedro, Incorporated (shown in the box on the right) volunteerism and Employees active in CSR have in 1999 business practices involved a relationship wherein raised half a million pesos among the company employees are allowed to take time themselves to support “The Children’s off work to engage in a community-oriented Hour.” With the CADPI CEO and activity. managers, they participated in Habitat for Humanity projects. 3. Some of the companies would allow and invite other members of the employees’ families to Volunteerism has promoted solidarity participate in the activities making BCR a type among employees and management, of family activity. Such is the case of CEMEX projected a strong company image to Philippines Apo Ladies Club. the public and enhanced competence of those involved. The CADPI proves 4. In an effort to demonstrate its commitment, that volunteerism benefits not only the Petron introduced an official corporate volunteer community but the company and its program entitled “Volunteers in Action.” This employees as well. enabled the company to match the volunteer work conducted by employees more effectively with the strategic goals of the business.68

EBCR Philippine Country Report Petron Foundation’s VIA (Volunteerism In Action) literally means “through”, “the way”, or “path”. It serves as the umbrella program of Petron’s 14 CSR projects in the areas of health & social services, culture & arts, education and the environment. VIA mobilizes volunteers not only from Petron’s workforce but also from its business partners the communities that they serve. The VIA follows a six-stage process in carrying-out all its programs. These are: Program / Project and Beneficiary Identification, Volunteer Recruitment and Mobilization, Internal Communications and Promotion, Coordination with Regional Offices/ Bulk Plants (Implementation of projects and mobilization of volunteers in different regions/ provinces), Measurement and Reporting and Monitoring and Evaluation. The process does not end in monitoring and evaluation since data from this stage will serve as guide in identifying upcoming project needs and specifications.DISTILLATION PHASEThere were two major activities conducted under this Phase: the Meeting of the Minds Forum and theRoundtable Discussion on Enhancing BCR.1. Meeting of Minds: FindingsDuring the “Meeting of Minds” (MOM) session of the First Asian Forum on Corporate SocialResponsibility (AFCSR), held on July 3, 2002, two major findings on the role of government in BCRwere emphasized: a. That government and civil society can positively affect a company’s take on CSR; and b. There are special instances or circumstances where businesses acted as social advocates including bringing local governments closer to communities. 69

Three major factors affect engagements of the three stakeholders in government-facilitated BCR asshown in the following Table. Table 4. Factors That Affect BCR Engagement Bottom Line Business Community Government Financial Longer term interest Impact community For LGUs mandate, translates to willingness income flow serve the community to deepen engagement Self-reliant Competing projects communities are less costly to Business is “profit engage with hungry” vs. privatesector led activity Social Reputation management Changes to Mandate community life Top-middle Leadership and Developmental leader- management support vs. community personal vs. policy company policy readiness Consolidation between Capacity-Building LGUs and national government Environmental Regulations Competitiveness issue Allows medium-long term planning including expansion activitiesThe participants pointed out the following with respect to government’s involvement in BCR: a. Government should initiate and provide a friendly political climate for BCR through appropriate policies and practices.70

EBCR Philippine Country Report b. Government should act as fiscalizer and capacity builder for both advocacy and BCR integration in government development plans. c. The government should understand the corporate citizenship issues and concerns while business and the community should understand the government’s CC policies. d. Government should be responsible for raising the awareness of CC and in the promotion/ advocacy of BCR as a key element or strategy.2. Round Table Discussion on Enhancing BCRThe roundtable discussion held last September 9, 2003, focused on the case studies presented by PBSP. Theparticipants highlighted the following points: a. The driver of BCR is the business sector, which should be dynamic and visionary in relating with the community. Business leadership must have a clear vision and should advocate government policies that encourage volunteerism. b. The government (national or local) should define its CSR agenda. Efforts must be intensified to help SMEs improve their internal operations and processes in order to improve their competitive advantage. c. Some issues and challenges in forging BCR include: 1. the lack of focus of the business sector in terms of what areas of concern or social issues to respond to or invest in; 2. the need for a strong civil society; and, 3. the need to advocate volunteerism as an expression of good citizenship. d. The partnership’s sustainability can best be achieved if partners work within the local culture and engage the people in decision-making instead of just downloading plans to them. The people and not the local government officials should have ownership of the programs. Communities should be organized so that even without the political leader, people can still support the programs. e. The emerging engagement is the business to business engagement (the business case) or the forging of business links between a large company and a small/community enterprise. 71

EBCR Philippine Country Report III. CONCLUSIONSF rom the findings on the three major research themes — PBSP’s CC Framework as model, Quality of Stakeholders Engagement and Enhancement of Government Role — the following conclusions aredrawn.A. PBSP’S CC AS A MODEL FRAMEWORKOverall, the knowledge and practice of corporate citizenship in the Philippines is extensive and advanced.Leading companies partner with government and civil society and pursue CSR as part of their programmanagement framework. By synthesizing the experience of these companies, and working side by sidewith them in the last 33 years, PBSP was able to develop the Corporate Citizenship Framework that servesa guide to companies in developing and implementing effective and efficient CSR programs. The keyaspects of this framework are Policy, Program Development, Systems Installation and Monitoring andEvaluation. This framework is a loop that essentially follows and is compatible with corporate businesscycles and overall strategies.As corporate citizenship is largely expressed by Philippine companies through four (4) main thematicexpressions (i.e., social investment, corporate-community partnership, managing workplace concerns, andenvironmental stewardship), this framework also serves as a key analytical guide for the programmaticresponses that businesses conduct with their communities.As BCR has evolved in the developed and developing countries, PBSP’s CC Framework presents the businesscase model as a strategic paradigm for corporate action. Simply put, a business case is the actionableopportunity for responsibility that would result in maximum or substantial business benefits, such as:increase in profits, reduced risks and reduced cost of doing business. Unconsciously, companies have beenusing the business case to justify their philanthropic activities for a long time. But it was only recentlythat CSR activities have been placed under rigorous scientific review to glean measurable and comparablebusiness cases. Business organizations agree that it is the business case that could provide the sustainabilityfor CSR. 75

B. ON THE QUALITY OF STAKEHOLDERS ENGAGEMENTThe study also showed that BCR is not an activity done purely within the confines of businesses andcommunities. Rather, BCR is influenced and impacted on by business, government and civil society. Thus,convergence of interests through partnerships has become the practice among the three players. BCR isalso influenced by peer pressure, businesses on other businesses. Thus, each sector has a role to play inenhancing the quality of these engagements. The study also showed that corporate citizenship is fluidbetween voluntary action and regulatory compliance.Heretofore, BCR has been applied under the presumption that communities are beneficiaries of private-public-NGO partnerships. The experience in the Philippines shows that the private sector has been slowlymoving away from this notion by converting communities into partners themselves, mostly through marketmechanisms. This means engaging even with communities that do not yet have the capacity for partnership.This challenge is being addressed by the large capability building components of nearly all communityrelations programs. Companies also manifest the difficulty in balancing developmental and entrepreneurialgoals, which at some point is resolved by the presence of intervening bodies like government, civil societyand other businesses.Looking at communities as partners is proof of the view that communities are stakeholders in economicactivity. Communities have been increasingly expressing a sense of entitlement to relevant informationon corporate activities. This sense of entitlement that communities feel regarding business operationsstems from the main point that communities have become more aware of their roles as stewards ofresources (i.e., environmental, human, etc.) and the sentiment that companies are only leasing/buyingthese resources from them. This sense of entitlement is the basis of their status as stakeholders ofcorporate activities and their reliance on legal and extra-legal mechanisms to enforce this case.Through BCR, businesses are able to resolve related issues such as local criminality and corruption, throughlegitimate opportunity like social entrepreneurship. It is a common thread among the collective experiencesthat business can be an instrument of peace and prosperity in a way that no government can be, becausebusiness can provide a “universal solution” through wealth redistribution. As more members of thecommunity receive both monetary and psychic income from business, communities not only grant thelicense to operate; they become suppliers, customers and collaborators. A good percentage of the companycases studied show that business involvement in poverty alleviation is not a dole-out, but rather aninvestment in the environment upon which it exists. Community relations is a long, drawn-out processand companies do (but sometimes forget to) recognize this by viewing it as an investment with a relativelyuncertain timeframe.76

EBCR Philippine Country ReportIn the Benchmarking Study, preliminary results showed that company’s BCR activities have a strong influenceon a company’s receiving a community’s support and license to operate, government support of businessinvolvement through recognition & incentives (approximation), adoption of resource friendly technologies,production design that considers use of recyclable materials and biodegradable packaging, institution ofhealthy and safe workplace environment and decreased incidence of negative media publicity.Processes that facilitate successful BCR engagements have the following features:1. Fully participatory at the start, treating all stakeholders as partners.2. Consistent and committed leadership throughout the engagement from all sectors.3. Goals of the engagement are aligned to organizational goals of the respective participants.4. Includes existing mechanisms and methodologies, framed under the overarching goals of the project.5. Fully utilizes the network of government agencies from local to national, as well as that of business & the community, towards the social preparation of communities for the entry of business.6. All aspects of the engagement are recorded and evaluated, and this includes the primary stakeholders and / or partners but other parties such as NGOs and media.Key Impact Areas of BCRThe most noted impacts of BCR are financial gain, reputation-building and people’s empowerment.1. A key impact area is the degree by which communities have been raised from poverty. For business, cost savings and income generation are key results areas that are used in the assessment of further engagement. For government, the lessened cost of conducting the community program is considered an effectiveness measure. Though not necessarily a key impact area, additional income from tax revenues generated by the economic activity is considered a measure of effectiveness of the engagement.2. The degree by which the engagement provides positive light on the parties concerned affects the sustainability and renewed commitment to the engagement by the principal actors. For governments, this means a reputation of effective public service, while for business it is about positive risk management and competitive advantage.3. Another impact area is the self-reliance that has been engendered in the community. This reflects well for both business and government as communities gradually shed off the character of being beneficiaries and develop the character of stakeholders. The developments in the engagement also affect business and government in terms of new learning in the process of engagement and partnership that empowers both sectors in other similar engagements. 77

C. ON THE ENHANCEMENT OF GOVERNMENT’S ROLEMost of the time businesses still perceive communities to be beneficiaries and this is due to the companies’mandate and function. This poses a challenge to the business sector to take the initiative in promoting theconcept of communities as stakeholders. A large number of businesses still do not know or are notcapable of turning community relations into partnerships, which explains why most businesses considerthe activity as a cost center. This is an area that government or other entities can continue to examine andexplore as they create and update policies regarding private sector involvement in development. This, ofcourse, assumes that government agencies possess a high degree of awareness and understanding regardingcorporate citizenship issues.As corporate citizenship provides a new context for the development of government policies, programsand regulations, another need must be addressed by government: to streamline and simplify regulationson how to do business. This balancing act will prove to be a daunting task and at some point nationalagencies must provide policy support for engagements that are implemented at the local level, especiallytaking into consideration the effects of devolution.The research takes into account that the survey is not fully indicative of the whole picture because of thevery low number of responses. However, the findings serve as ground for further research into the area, asthe range of current responses show that there is a bigger and more definitive story that the Board ofInvestments (BOI) may be in a position to address. Given the data, there is a serious need for the BOI totake the lead in assessing the current relevance of incentives to target beneficiaries in order to ensure thefull social impact that incentives are supposed to have. This entails expansive and political work, for it isacknowledged that there are numerous sector-specific laws with an incentive package component thatthe BOI implements.Though BOI had been involved in the design and incorporation of the incentives in these laws, at that timeit could not take into consideration trends such as Corporate Citizenship which were emerging as acompetitive advantage.Incentives planners and implementers should keep abreast of CSR issues because the desired outcomes ofthese incentives are basically the same as those of CSR. National government has already been strengtheningits ties within its agencies to ensure that the environment for business is optimal. Activities that will leadto employment generation and environmental stewardship are laudable as CSR-related criteria, but thereis a need for government to provide the connection between the monies that it chooses not to claimversus the responsibilities of business to be a financially and socially profitable institution.78

EBCR Philippine Country ReportClearly, information about incentives needs to be communicated more strategically inside companies inorder that the guaranteed benefits may be enjoyed by the companies and the incentives may be monitoredand made part of the financial resources of the companies. The research is not recommending additionalforms or other red tape, but rather strategic interventions that would promote internal reporting andevaluation within the company’s value chain. This could possibly include realignment of monitoringstandards/procedures to include assessment of company-wide impact. An untapped area is supply chainmanagement, where businesses can share information and expertise on policies and practices with thecompanies they source from.Government must accelerate the process of empowering local government to assist in the monitoring ofrequirements as well as in promoting the practice of CSR among businesses in its territory. One way thatthis could be done is to encourage tie-ins for particular legal requirements with the incentives savingsgenerated. For example, the livelihood activities that mining companies are supposed to develop andimplement in the community could be funded partially from ITH savings. Such tie-in can work on a case-to-case basis, depending on accounting procedures and extra-legal regulations that prevail (i.e., theGarments & Textiles Export Board for clothing manufacturers). In order to be strategic, models of incentivetie-in which may already be operational in the local governments should be sought out and used as caseexamples for policy action at the national level.Furthermore, the government must build up the capability of businesses that were granted incentives toadvocate CSR. The government can look at civil society and known responsible businesses as partnersand as resources in order to strategically encourage responsible profitable behavior. It is apparent thatcapability building should not only be within the confines of the granting agency, but also spread out toevery agency that is involved in monitoring these incentives. The private sector-led approach that manyagencies now have in implementing several projects also serve as a reference for a formal learningenvironment for government and business.The PBSP program, “LGUs as CSR Enablers Program,” seeks to build the capability of local governments topromote CSR by providing enabling policy environments for the business locators to adhere to goodcorporate citizenship practices. Clearly, this has to be complemented with capability building as well onthe regional and national levels given that, among all the possible intermediaries between communitiesand business, it is government that communities see as the final authority. The movement of socialresponsibility reporting should also extend to government in the sense that a great number of BCR in thePhilippines are done with government intermediation. Several roles of the government in the promotionof CSR have been identified: fiscalizer, initiator, enabler and capacity-builder. 79

D. ON VOLUNTEERISM AS A STRATEGYThe contribution of volunteering at the corporate level has not been widespread, mostly due to difficultiesin aligning volunteerism and the for-profit nature of companies, and the management of employeevolunteers. This has led to creative solutions such as the formation of employee clubs and groups toimplement programs or the delegation of the decision to field managers with a better feel for communitystakeholders.There is still a need for companies to provide the policy and program support for the sustainability of theseefforts. There is need to raise the capacity of most companies in these areas. This may require theassistance of companies and company foundations or partner agencies such as the PBSP. Many companieshave sought the assistance of PBSP in their new areas of involvement. It must be noted that progress andsuccess in the areas of involvement are equated with the comfort level of these businesses in learning newparadigms and methods.Countless testimonies have shown that volunteering boosts a company’s image in a community morepowerfully than money donations. The Business in the Community (BITC) report on employee communityinvolvement recommends volunteering as an involvement strategy that satisfies both employees andexternal community (i.e., local community) by humanizing the business to both communities. UNV alsoreiterates that volunteering is “predicated on reciprocity, a belief that one’s voluntary efforts will be recognizedby the community... Today more than ever before, caring and sharing are a necessity, not a charitable act.”This validates one of the benefits of volunteering, that it is reputation capital for businesses. As far as thebusiness case for CSR goes, volunteerism is a strategy that can be used to achieve business goals.A significant area that needs to be addressed in order for companies to be more willing to engage incorporate/employee volunteering in the Philippines is the benefits gained from it. As CSR is currentlymoving away from philanthropy to the promotion of the business case, volunteerism promotion shouldalso take this into consideration. For example, volunteerism has had a long history in the Philippines asindicated by the existence of the Philippine National Volunteer Service Coordinating Agency (PNVSCA)which had put in place established full-time volunteering partnerships with leading volunteering groupsfor both internal and foreign assignments. Yet the agency has limited networking with companies forpartnerships on volunteering. In fact, a limitation faced in the study was the lack of policy prescriptionfrom volunteer organizations like the PNVSCA and UNV on the issue of organizational benefits derivedfrom volunteering.As corporate volunteering does present clear benefits not only to employees but to businesses as well,volunteer organizations like UNV must present and communicate a clear position on this issue. In manyrespects, CSR is a campaign-driven movement. Hence, one of the UNV’s biggest roles is to catalyze the80

EBCR Philippine Country Reportdiscourse and work towards promoting the “reciprocity” aspect of volunteerism. Because of the limitedexperience of UNV in the field of BCR itself, one of the roles that UNV can play is that of facilitatorbetween appropriate resources such as businesses with other businesses.There is a need to communicate and provide companies with volunteer management technologies topromote employee volunteerism. A learning environment for companies should be established, as this notonly redounds to benefits in community relations but in other aspects of the business itself. There must beroom for learning, especially since there are still businesses that have limited experiences in CSR except asa public relations strategy. The development of learning tools for volunteering to help companies positionvolunteerism in their corporate social responsibility or corporate citizenship would allow the enhancementof current practice.Employee volunteers take on the dual role of company ambassadors to communities and as voices ofcommunities to management. This is the very role that so-called community relations professionalsperform. As employee volunteers do not necessarily have the training for this duality, it is important thatemployee volunteers be trained for it even though theirs are usually short term stints. This role has beentaken by corporate foundations as employee and corporate volunteering are considered components ofcorporate citizenship.Companies with higher incomes and larger number of employees have been more inclined to conductcommunity relations programs as an expression of their corporate social responsibility. There have alsobeen moves toward bringing the practice to SMEs, but the constant economic battering being taken bythe country has delayed moves toward this and more creative solutions are necessary to market the idea.Some SMEs have taken the route of larger corporations and formed joint corporate bodies that haveidentified communities of concern. SMEs have not really been the target of employee volunteeringcampaigns, understandably because of their more limited resources. As is, SMEs have become a beneficiaryin a sense, as corporate citizenship advocates are in the process of developing a CSR advocacy aroundSMEs. The UNV can probably assist here on a programmatic basis.Another area for enhancement is the development of tools for company agents who engage withcommunities as a function of their department but are not considered community relations units. Apartfrom PBSP, which is developing a training manual for what is otherwise known as “CSR Frontliners”,international agencies as well such as IBLF and BITC have been developing materials highlighting thecommunity relations aspect of work by various corporate departments. One way that volunteers can addinto this area is through the mentoring of such skills within companies, something akin to recognizing theworkplace as a community. This would still need further processing as this could be also be construed aspart of a human relations department’s staff development function. 81

E. ENABLING FACTORS FOR EFFECTIVE BCR ENGAGEMENTSThe study revealed that the factors enumerated here have helped shape and continue to facilitate PhilippineBCR engagements:PBSP as Leader and Advocate. PBSP’s continuing advocacy of CC/CSR is a major factor that hasenabled its member companies and the Philippine business community to engage in business-case typesof engagements. It has developed the CSR Framework that serves as guide to companies engaged in CSR.Its experience serves as models to other companies who wanted to replicate them in their own companies.CSR Corporate Champions. Leadership is a key element in successful CSR especially in the initialstage of business or of engagement. Empowered and enlightened leadership across all sectors providesthe personal commitment for the completion of tasks, and effectiveness of the engagements. A keydimension of leadership that arises is the CEO’s ability to be a true leader for programmatic developmentwithin and outside the company.To sustain their efforts, CSR champions must consistently look at how their leadership is promoting mediumand long term benefits for their companies, customers, communities and shareholders. This holds true forgovernments as well, since BCR is done in the field under the jurisdiction of local governments. Primarilyseen as intermediaries between businesses and communities, national and local governments must alsotake a leadership position in promoting CC concepts given that most local governments acknowledge theirmeager financial position. Given the limited resources of SMEs also, an important bridging function thatlocal governments can do is to enable communities to become less dependent on business and ondevelopmental assistance. This way, communities would have the opportunity to become leaders of theirown accord.Policy. A core finding is that, in order for CSR to be most effective for companies, the management andthe employees should be serious about defining the place of the business in society. This will be thefoundation on which their core social priorities will arise. The cases show that businesses, regardless ofwhether they choose to express their CSR in means that are related to their core business or completelyunrelated, must be true to the core of what and who they are as corporate citizens. If a company does notknow itself, all its projects, no matter how well funded, will very likely be seen as empty by civil societyand government, and even by internal stakeholders like the employees.Program. Policies have to be expressed in concrete terms, and a program defines the operational directionthat projects can take. A project usually brings about more expectations from communities, or unearths orgives rise to more problems. Integrated programming by companies helps reduce these negative resultsand define expectations. This track is usually more prevalent in companies that create a particular82

EBCR Philippine Country Reportdepartment as its community relations arm. This is different from appointing select personnel to managecommunity relations in an ad hoc function, or assigning community relations to a single departmentwhich would give rise to the tendency that people “given a hammer, thinks every problem is a nail” (e.g.,community relations in the hands of a PR person will be projects that are always slanted towards publicrelations; human resource designing community relations as staff development, etc.). There is growingrecognition globally that community relations is a multi-disciplinary field. In the Philippines, there arethose that seem to more readily practice this concept and there are those that have difficulty tying in thedifferent perspectives of their various departments. This latter problem, which manifests itself inprogramming, would be solved by policy resolution.Experience dictates that companies do not have to start community relations alone. A BCR program is infact most effective for both businesses and communities when a third party is involved — be it civil societyor government —to either facilitate or support. However, communities are demanding more and morethat companies engage with them directly and avoid relying too heavily (in their perception) on governmentor civil society. This presents a challenge for companies that are not prepared or do not understand thatthe parameters of engagement would best be co-developed with communities.Systems. As companies become mature in terms of conducting their social responsibility and corporatecitizenship, the implementation of their programs is done systematically. Aside from importing them fromother companies or non-profits, systems can be drawn from the experiences of the implementing companiesthemselves. These systems have to touch on every aspect of a community project: from conception,promotion, implementation, financing, to monitoring and evaluation. These systems allow for efficientand effective implementation of projects, the results of which are meant to satisfy not only corporatemanagement but communities and other stakeholders as well.Measurement and Reporting. Philippine companies have been relatively weak in this area, mainlybecause of the perception that companies would not want to appear that they are profiting from socialresponsibility. Measurement and reporting is usually only done internally and only to justify costs tofinance departments. An important reporting mechanism that most companies do not ignore is the media,which is strong in the Philippines. Internationally, external reporting is considered a means for companiesto get feedback on their social performance and for communities to attain some sense of “accountability”.As international pressure to strengthen this area increases, more Philippine companies are becoming moreopen to reporting and measurement based on standards such as Global Reporting Initiative (GRI),AccountAbility (AA) 1000, Global Compact, etc. 83

PBSP’s Benchmarking Corporate Citizenship tools and reporting give companies the opportunity tobenchmark their CC performance against other companies within their industry and with business as awhole. This is a landmark development in Philippine CSR as systems are established for companies torealize that their social investments are actually a means to achieve results that satisfy both business andsocial objectives. The program ensures this through the use of verifiable indicators to benchmark CCactivities.This area is challenging for communities considering that many companies are oligopolies, and reports ofpossible misconduct cannot be readily acted upon by consumer pressure because there is no viablealternative. Social responsibility is not considered a key retail marketing point, for two reasons: (1)because most consumers do not exert the buying pressure for more socially responsible practices or products;and (2) because quality and price are still considered the key buying criteria. Reporting is becoming amore prevalent practice in the supply chain as suppliers and buyers are becoming more pressured toaddress international buyer concerns.84

EBCR Philippine Country Report OVERALL RESEARCH FINDINGS: INTERNATIONAL TRENDSS ome trends that have emerged from the seven countries in the project are shown below. Each individual “country report” provides further elaboration and exploration of the individual countryexperiences and the “international report” provides a deeper level of detail and analysis of theseinternational trends.BrazilThe research suggests that many Brazilian companies are beginning to move beyond philanthropytowards more participatory models of engagement with communities. The research has revealed thatNGOs have had difficulties finding committed volunteers from companies and other sources. Thisscarcity is attributed to both the absence of a strong “volunteering tradition” and the presence of aculture that depends upon the state to solve social problems within the country. The research alsofinds that some companies have developed their own social projects that support social organizationsand NGOs and that their absence of volunteering practices can be altered. The importance of involvingleaders from within the company in such work has also been noted. Meanwhile, the research activitiesdemonstrated the value of creating learning between companies for encouraging healthier business-community relationships.One of the case studies looks at Telemig Cellular, which is promoting child rights in Minas Gerais inpartnership with the State Council for the Rights of Children and Adolescents. Another reviews theutility company Copel’s ‘Luz das Letras’ education programme, which aims to eliminate illiteracy inthe workplace and its wider community. A third explores the work of an NGO, Agua e Cidade, inpromoting awareness and action on water and sanitation. 87

GhanaIn Ghana, the need to improve the relations between businesses and their host communities and theimportance of citizens and media in fostering this improvement, represent two significant emerging trends.The research has revealed that on the whole, corporate social and environmental responsibility is not dealtwith an integrated part of business planning, although Ghanaian companies seem to be moving awayfrom a “minimalist” towards a “discretionary” corporate social responsibility agenda.Another revelation is that public expectations of Ghanaian companies in social and environmentalresponsibility are rising. Social and environmental responsibility is no longer viewed as a goodwill gesturebut rather as a mandate for corporate executives. One of the case studies explores the emergence anddevelopment of a local Corporate Social Responsibility (CSR) Movement. Community engagement is alsoa prevalent theme in the Ghanaian research: one case looks at the community engagement experience ofAshfoam Company, a local manufacturer of mattresses and rubber products. The research activities havealso revealed a number of gaps, including limited media coverage of CSR issues, the inability of companiesto deal with responsibility concerns in an integrated manner, inadequate or non-existent support institutionsand deficits in regulatory as well as government incentives.IndiaFindings in India indicate that the tradition of paternalistic philanthropy remains strong, althoughsome companies are experimenting with participatory approaches inn their relationships withcommunities. There appears to be a strong emphasis upon corporate initiatives and involvement ineducation, training and healthcare. Some of the case studies focus on trusts and foundations set upby companies to implement their social initiatives. Another interesting aspect of the Indian scenariois the growing interest and participation of consumer groups in the movements for corporateresponsibility.One of the case studies in India focuses upon Tata Steel, part of the industrial giant Tata Group, andreviews the company’s work on corporate sustainability initiatives. Other case studies include socialincentives by companies in various sectors such as IT (Wipro), engineering/manufacturing (TELCO), andconsumer goods (Coca Cola), exploring issues such as innovative educational approaches, volunteerismin social development, and other social responsibility themes.88

EBCR Philippine Country ReportLebanonThe research findings from Lebanon show that there is limited awareness and understanding ofbusiness community relations and the benefits the field brings to corporations and communities.Although Lebanon does not have a well-established center to further develop the field, an encouragingsign is that the majority of Lebanese and multinational organizations have a history of supportingtheir communities through philanthropic cash and in-kind donations. Many do so on a low profilebasis because they strongly believe in contributing to the development of their communities, yet donot recognize the strategic added value of such initiatives on their operations and bottom line.The project has created a significant amount of momentum and public awareness about the social andenvironmental responsibilities of business in Lebanon. A specific focus of the action research in Lebanonwas the promotion of employee volunteering and strategic partnerships in various Lebanese and globalcompanies. One partnership with telecommunications company FTML promoted corporate volunteerismthrough an event to celebrate International Volunteer Day and the International Year of Volunteers (IYV2001). Another facilitated the development of strategic (and hopefully sustainable) partnerships withthe co-management of the ‘Go Green’ environmental project, initiated and coordinated by local restaurantSchtroumpf in partnership with FTML, Coca Cola and Tetra Pak East Med.NigeriaThe research in Nigeria indicates that issues concerning the large multi-national oil industry in thecountry have affected the way companies relate to communities. In particular, the legacy of communityneglect and ecological disasters in the oil rich Niger Delta has made engagement problematic yetvery necessary. Despite the attempts of oil companies to re-engage with host communities, thesocial responsibility practices of other businesses remain largely limited. The research has analyzedthe situation by focusing on the sustainability of these practices and how they have helped buildcapacity in host communities.One of the cases looks at the oil industry by examining the practices of TotalFinaElf in its interactionwith oil communities in the Niger Delta. Another explores the education and capacity buildingefforts of Nigerian Alternative Trade Network to empower disadvantaged groups and producers underfair trade principles for sustainable development. Two cases look at the banking sector: one considersthe experience of the Citizens International Bank, which has established an innovative employeegiving-scheme, another reviews at the efforts of Lead Bank PLC, Iloko-Ijesha Traditional Institutionand two other organizations, which have been collaborating to promote community development andeconomic empowerment through education. 89

South AfricaThe work in South Africa suggests that the culture of corporate community involvement or corporatesocial investments (CSI) is well established and has evolved over time from a simplistic philanthropicapproach to a more integrated corporate citizenship and more pro-active sustainable development approach.The research indicates that pursuing this agenda will require organizational transformation to movecompanies from a defensive stance of risk management and philanthropy towards the integration of socialand environmental performance imperatives in all aspects of organizational activities.The main emphasis of the cases is upon employee community involvement (or corporate volunteering).The research reveals that corporate employees can, and should, play a leadership role in thetransformation process by building relationships with various stakeholders including the community.Examples come from ABSA Group Limited, AFROX and the Board of Examiners. One of the other casestudies looks at a black empowerment initiative. Finally, one case explores the experience of smalland medium enterprises (SMEs), a business sector where there remains an urgent need for awareness,education and promotion of responsible business practices.90

EBCR Philippine Country Report Significance of the Project to UNV and New Academy of Business ParticipantsT he people from UNV and the New Academy of Business shared what this project meant to them in the course of their project engagement:“Previous experience had indicated to us that there was a heavy emphasis upon northern perspectivesin the debate regarding responsible business practice. The action research process of this project hasoffered a way to channel diverse voices and experiences into the debate as well as foster new waysof doing business in the seven countries. In addition we saw this as a way to have an influenceupon the relationship between the United Nations and the private sector.” — Dr. David Murphy, Director, New Academy of Business“This project has allowed us to play at living our methodological values through real worldactivities. We’ve had to work internationally in way that allowed individuals and localcommunities to do the work, all the while noticing and respecting cultural differences.” — Marie-Helene Kutek, New Academy of Business“The volunteering aspect was something different for us and has brought new awareness of therelationships between mutuality, business and development. We’ve been challenged to changeourselves through the project as well.” — Rupesh Shah, Action Researcher, New Academy of Business“The partnership between the New Academy of Business and UN Volunteers has enabled us topioneer a new model of conducting relevant action/research that draws on the comparative advantageof each organization, creates stimulating volunteer assignments, builds useful knowledge, generatesnew resources, and produces concrete results of interest to the international development community.” — Sharon Capeling-Alakija, Executive-Coordinator, UNV 91

“This UNV and New Academy of Business Project partnership, has contributed in many ways, while delivering the results of the action-research it had proposed from the beginning. At the operational level, however, one important output was the impressive number of valuable on-going initiatives, compiled by the UN Volunteers assigned to the different participating countries. This constitutes an important by-product, in the form of documented “good practices” involving volunteer action, from which both UNV and the New Academy of Business can draw, so as to estimulate their respective partners who may be searching for comparable alternatives, adjusted to their development needs and realities, to initiate their own programmes.” — Douglas Evangelista - Chief for Arab States, Latin America and The Caribbean -Operations Group, UNV. “Partnerships with the private sector have gained momentum lately in the UN in general and UNV in particular. This project has been crucial to develop the conceptual framework for UNV to work with private companies. It has also generated concrete initiatives to further advance UNV’s agenda with the private sector.” — Edmundo Werna, UNV Focal Point for the project ‘Enhancing Business-community Relations’, Research and Development Unit, UNV92

EBCR Philippine Country ReportREFERENCESBendell, J. (2002) In Our Power: The Civilisation of Globalisation. Unpublished PhD. Thesis, School for Policy Studies, University of Bristol, UKLuz, Juan Miguel (2000) Corporate Social Responsibility in the Global Community: A View From The Ground: Building Partnerships For Development.Mahajan, Apama Enhancing Business Community Relations: The Role of Volunteers in Promoting Global Corporate Citizenship. UNDP/UNV, TERIPrieto, M. and Bendell, J. (2002) ‘If you want to help then at least …start listening to us’: From factories and plantations in Central America, women speak out about corporate social responsibility. Final report on Codes of Conduct as Tools to Improve the Situation of Women in Southern Workplaces for UK Department for International Development, London.PBSP Annual Report (2002).PBSP-CCC Brochure (2003).Public-Private Partnerships for the Urban Environment (PPPUE) Facility Brochure.Reason, P. and Bradbury, H. (eds.) (2001) Handbook of Action Research (London, Sage).Seeley, C., Appiah, K. and Murphy, D.F. (2002) Understanding Causalities in MSE Radio Programmes, Final report to the International Labour Organization’s InFocus Programme Boosting Employment through Small Enterprise Development (ILO-SEED),Geneva.Shah, R. (2001) Relational Praxis In Transition Towards Sustainability: Business-NGO Relations and Participatory Action Research. Unpublished PhD. Thesis, School of Management, University of Bath, UK.Tennyson, R. and Wilde, L. (2000) The Guiding Hand:: Brokering Partnerships For Sustainable Development. United Nations Staff College and The Prince of Wales International Business Leaders Forum.The Center for the Study of Philanthropy, City University of New York. Employee Involvement in the Philippines 2000. Written by City University of New York, American Chamber Foundation and Philippine Business for Social ProgressA Backgrounder on Corporate Social Responsibility, Asian Institute of Management, 1997. 93

EBCR Philippine Country Report ANNEX 1: COUNTRY BACKGROUNDThe LandOfficially, the Republic of the Philippines is an archipelago of over 7,100 islands and islets lyingabout 500 miles (800 km) off the southeastern coast of Asia and covers a land area of about 115,800square miles (300,000 square km). The country spans about 1,150 miles (1,850 km) from south tonorth at its longest extent and about 700 miles (1,125 km) from west to east at its widest extent.Surrounded by the Pacific Ocean, it is bounded by the Philippine Sea to the east, the Celebes Sea tothe south, the Sulu Sea to the southwest, and the South China Sea to the west. The two principalislands of the Philippines are Luzon in the north, occupying 40,420 square miles (104,688 squarekm), and Mindanao in the south, occupying 36,537 square miles (94,630 square km). The Visayangroup of islands in the central Philippines include Panay, Negros, Cebu, Leyte, and Samar; Mindoro issituated directly south of Luzon, and Palawan is isolated in the west. Metro Manila, also known asthe National Capital Region, is a megapolis of about 17 municipalities and cities.The ClimateThe climate of the Philippines is tropical and is strongly affected by monsoon (rain-bearing) winds,which blow from the southwest from approximately May to October and from the northeast fromNovember to February. Thus, temperatures remain relatively constant from north to south during theyear, and seasons consist of periods of wet and dry. Throughout the country, however, there areconsiderable variations in the frequency and amount of precipitation. The western shores facing theSouth China Sea have marked dry and wet seasons. The dry season shortens progressively to the eastuntil it ceases to occur. During the wet season, rainfall is heavy in all parts of the archipelago exceptfor an area extending southward through the centre of the Visayan group to central Mindanao and 97

then southwestward through the Sulu Archipelago; rain is heaviest along the eastern shores facingthe Pacific Ocean. From June to December typhoons often strike the archipelago, mostly from thesoutheast. Their frequency generally increases from south to north; in some years the number oftyphoons reaches 25 or more. Typhoons are heaviest in Samar, Leyte, eastern Quezon province, andthe Batanes Islands, and when accompanied by floods or high winds they may cause great loss of lifeand property. Mindanao is generally free from typhoons.Physical Resources And UtilizationThe Philippines is chiefly an agricultural country with crops that grow abundantly throughout the year.The principal farm products are rice, corn (maize), coconut, sugarcane, abaca (Manila hemp), tobacco,maguey (used for making such products as rope), and pineapple. Many tropical fruits are also raised, themost important being banana, mango, lanzon, citrus, and papaya. A wide variety of vegetables are raisedfor domestic consumption. Rice, the principal staple crop, occupies much of total farmland, but especiallyin central and north-central Luzon, south-central Mindanao; western Negros and eastern and centralPanay. Since the early 1970s, rice production in the Philippines improved considerably though notconsistently. Factors contributing to this increase in output include the development and use of higher-yielding strains of rice, the construction of feeder roads and irrigation canals, and the use of chemicalfertilizers and insecticides. Use of scientific farming techniques, such as the newer strains of rice, hasrequired the application of chemicals that are expensive and that generally must be imported.The Philippines is one of the world’s largest producers of coconuts and a major exporter of coconutproducts. The area devoted to coconut production is second only to that used for rice and corn. ThePhilippines also produces more than one-third of the world’s copra. Sugar is one of the country’s topexports and earns a substantial amount of foreign exchange, with much of the sugar crop exported to theUnited States. Abaca, or Manila hemp, the source of a useful plant fiber, is also an important export. It isgrown extensively in eastern Mindanao, southeastern Luzon, and on Leyte and Samar. Due to recentabrupt changes in weather such as El Niño, agiculture has become rather unstable and staples such as ricehave had to be imported.At one time about half of the Philippines’ total land area was covered with forests. Of this, a large part wastrees of commercial value, especially lauan, narra (used in cabinetmaking), ipil, molave, and kamagong.High-quality timber and veneer products traditionally have been leading exports, although their importancehas declined. Heavy logging and inadequate reforestation measures, however, have reduced considerablythe amount of forested land. Other forest products include dyewoods, rattan, tanbarks, gutta-percha,beeswax, and rubber.Fishing is also one of the most important of Filipino industries. No fewer than 2,000 varieties of fishare in the seas surrounding the islands and in lakes, rivers, estuaries, and fish ponds. The most98

EBCR Philippine Country Reportimportant commercial fishes are milkfish (a herringlike fish), anchovy, herring, sardine, mackerel,grouper, snapper, cavalla, mullet, barracuda, mudfish, and caesio. Fish are raised in ponds in someprovinces of Luzon and Panay. Canned tuna is the principal fish exported, and commercial fishing isconducted primarily off Palawan, Negros, Mindanao, and Panay. There are pearl beds in the SuluArchipelago to the south, and mother-of-pearl is exported to China and elsewhere. Tortoiseshells andshells used for windows are exported to Singapore, Malaysia, and other countries.The Philippines is rich in mineral resources. There are major deposits of gold in northern and southernLuzon; iron ore in northern Mindanao and on nearby islands and in central Luzon; copper in west-centralLuzon; lead and zinc in western Mindanao; and high-grade chromium ore (chromite) in west-central andsouthern Luzon, northern Mindanao, and central Palawan. Deposits of silver, nickel, mercury, molybdenum,cadmium, and manganese occur in several other places. Nonmetallic minerals include limestone for cement,found on Cebu, Luzon, and Romblon; salt and asbestos on Luzon; marble on Romblon and Panay; asphalton Leyte; mineral waters on Luzon; gypsum on Luzon; sulfur on Luzon, Leyte, and Mindanao; guano andphosphate rock on Cebu and Bohol; coal and silica on Cebu and Palawan; and petroleum off the northwestshore of Palawan.The PeopleThe great majority of Filipinos are Roman Catholic; adherents of the Philippine Independent Church (theAglipayans), Muslims, and Protestants are the largest religious minorities, including a Protestant sectcalled Iglesia ni Cristo. Roman Catholicism has been strengthened by an increase in the number ofFilipinos in the Church hierarchy, the building of seminaries, and the high involvement of the Church inthe political and social life of the country.The Philippine population reached 83 million in 2002. The population density of the Philippines ishigh - some 193 per square kilometer on the average - although the distribution of the population isuneven. Population density in urban areas is extremely high - in the National Capital Region it isabout 11,580 per square kilometer - while density in outlying areas such as northeastern Mindanaois considerably lower than the national average. Because it is largely a Roman Catholic country andbecause most of its population is rural, the country has a high birth rate. Efforts since the mid-1950sat reducing the overall growth rate have had some success, but reductions in the birth rate have beenpartially offset by reductions in the death rate. Since World War II, the population has tended tomove from rural areas to towns and cities. At the beginning of the 20th century more than 80percent of the population was rural, but by the late 1980s the number had dropped to less than 60percent. There is also a considerable amount of Filipino emigration, particularly of manual laborersand professionals. Many emigrants have gone to the United States, Okinawa, Guam, and Canada; inaddition, a large number of skilled and semi-skilled workers have taken temporary overseasassignments, mainly in the Middle East. 99

Government StructureThe Philippines has been governed under three constitutions, the first of which was promulgated in1935, during the period of U.S. administration. It was closely modeled on the U.S. Constitution andincluded provisions for a bicameral legislative branch, an executive branch headed by a president,and an independent judiciary. During the period of martial law (1972-81) under President FerdinandE. Marcos, the old constitution was abolished and replaced by a new constitution (adopted in 1973)that changed the Philippine government from a U.S.-style presidential system to a parliamentaryform: the president became head of state, and executive power was vested in a prime minister andCabinet. President Marcos, however, also served (until 1981) as prime minister and ruled by decree.Subsequent amendments and modifications of this constitution replaced the former bicamerallegislature with a unicameral body and gave the president even more powers, including the ability todissolve the legislature and (from 1981) to appoint a prime minister from among members of thelegislature.After the downfall of Marcos in 1986, a new constitution, similar to the 1935 document, was drafted andwas ratified in a popular referendum held in 1987. Its key provision was a return to a bicameral legislature,called the Congress of the Philippines, consisting of a House of Representatives and a 24-member Senate.House members are elected from districts, although a number of them are appointed; they can serve nomore than three consecutive three-year terms. Representatives of special interest groups are also electedinto the House. Senators, elected at large, can serve a maximum of two six-year terms. The president, thehead of state, can be elected to only a single six-year term, and the vice president to two consecutive six-year terms.The president appoints the Cabinet, which consists of the heads of the various departments responsiblefor running the day-to-day business of the government, the largest of which in terms of coverage arethe Departments of Education, Health and Social Work (including its allied agencies). Most presidentialappointments are subject to the approval of a Commission of Appointments, which consists of equalnumbers of senators and representatives.The country is divided administratively into 73 provinces, which are grouped into 12 regions and 2autonomous regions; the National Capital Region has special status. Each province is headed by anelected governor. Local political subdivisions that also have elected officials include cities andmunicipalities; the ancient barangay is the smallest unit of government.100

EBCR Philippine Country ReportThe Political EconomySeveral factors have influenced the dynamics of Philippine business. Business and industry were mainlyfamily-owned affairs during the early 20th century (many still are even up to the current period), and areoften run patriarchally. The strong influence of the Roman Catholic Church on personal, state and economicaffairs paved the way for business altruism. Early on in the country’s history, agriculture and industry wereand still are strong polar facets of the economy, pulling resources to one side depending on the interplayof crises, personalities and politics.Post World War IIIndustrial policy was focused on supplementing intermediate imports (i.e. imported processed goodsmeant as input into other industrial processes) and being globally competitive. The Philippines wasfocused on playing catch up with emerging nations, such as Japan, in the 1950s. In the process, theproductivity of the mainly agricultural economic base was neglected, where majority of the peoplewere employed. In 1970, lopsided competitiveness policies had created an environment where thetop 5% of Filipino families had an annual income 33 times the average of those in the lowest 20%.Seeing the need to create higher value-added production, export of manufactures such as electronicswere encouraged despite the initial low local content and the high import costs of intermediate materials.Domestic pump-priming, import-substituting economic policies such as the state management of naturalresources and the creation of government corporations were brought on by strong nationalist sentiments.The local political turmoil of the 1970s brought on by the reelection of Ferdinand Marcos as president andhis subsequent declaration of Martial Law created an environment that was not conducive to free business.Crony capitalism was rampant, and concurrent external turmoil (i.e. oil crisis, Vietnam War and US recession,etc.) contributed to the downward spiral of the economy. This extended into the early 80s, in spite ofmajor structural reforms and massive developmental loans from such institutions like the World Bank andIMF, which actually placed greater pressure on government to obtain revenue.EDSA and BeyondIn 1986, a popular and peaceful uprising known as the EDSA (Epifanio delos Santos Avenue, a nationalroad network) revolution unseated Marcos and a process of democratic and economic renewal ensued.Entities doing business in the Philippines had to get used to the politicization of economic andbusiness affairs. This was further reinforced by the inclusion of broad economic policy within the1987 Constitution, such as limitation on foreign ownership of resources. Maximum sectoralparticipation in all policy affairs had also been mandated in the Constitution, mainly to safeguardagainst abuses by any particular party. 101

The Philippine economy rose up despite obstacles such as a balance of payments crisis, which couldbe traced back to previous Administrations, and massive power failures. By 1996 the Philippines waswell on its way from a medium developing country to newly-industrialized country (NIC) status, withseveral reforms taking place in banking, communications, power & transportation. The propertymarket was booming, and related industries such as construction benefited as well. The Philippinesparticipated in strengthening and promoting free trade through regional networks such as the ASEANand the AFTA, as well as signed on as a founding member of the WTO. Despite these efforts toimprove domestic industry (i.e. GDP), GNP was mainly supported by remittances of overseas Filipinoworkers.In 1997 the Asian Crisis shook the region and its effects spilled over into the latter years of the decade. Allsectors dependent on intermediate imports were pushed into the middle of the Crisis as the peso depreciatedto the US dollar by 48% by end-1998, resulting in work stoppages and increased overhead costs. To topit all off, in 1998, the agricultural sector was hit with the worst recorded drought in 31 years - whichseverely strained the services sector to prop up the economy. Years of restructuring had prepared thefinancial sector to respond quickly to conditions brought on by the Crisis. However, leniency with loansstandards provided to business during expansionary times had caused non-performing loan (NPL) ratios ofbanks to balloon as businesses were forced to default. Banks had to close shop and several consolidatedtheir assets to weather the storm. Along with this, some still had to be resuscitated with government aid.The Asian Crisis served as a yardstick for the Philippines to strengthen its economy against external shocksthrough the strengthening of domestic industries. Industrial and sectoral plans played a key role indevelopment planning as these would affect the communities in those areas. The Investments PrioritiesPlan (IPP) released by the Philippine Department of Trade lists the sectors that would be given priorityincentives. After the Asian Crisis, incentives for business to locate outside the urban areas were increasedin order to address poverty and backward development in these areas.Employing mostly Porter industry analysis and consultations with the industrial sector, government labeled22 industries, both export-oriented and domestic, as strategic industries for Philippine economic growth.This move proved to be the catalyst for the industry clustering concept. This strategy allowed linkedindustries to benefit from the growth of a major industry within a region, as well as benefit from potentialforward and backward integration.Poverty has increased from 31.2% in 1997 to 40.1% in 2002. Income distribution has also deterioratedas the share of the poorest 30% of households to total household income has declined from 9.3% in1988 to 7.8% in1997. Meanwhile, the share of the top 10% went up from 35.8% to 39.7% withinthe same period. This gap is wider in Southern Philippines, where abject poverty is a major cause ofstrife between Christians and Muslims. Infrastructure is still a major deficiency in several areas ofthe country and contributes to the high cost of business and development.102

EBCR Philippine Country ReportPeace And OrderThe Philippines deposed elected President Estrada early in 2001 through a contestably popular revolttagged as EDSA 2, which was incidentally led by members of the business sector, and Vice PresidentMacapagal-Arroyo was sworn into the Presidency. The mass uprising of the urban poor, three months laterin the tragic EDSA 3, shows that poverty is an urgent reality that needed to be prioritized. Her iron-ladystyle of leadership has elicited both praise and scorn from her supporters as well as accusations of beinganti-poor.Outlawed political organizations have long-standing operations in the country, the principal onesbeing the Moro National Liberation Front (MNLF) and the Moro Islamic Liberation Front – both groupsseeking autonomy for Muslim Filipinos (Moros), and the National Democratic Front (NDF), a Communist-led insurgency movement that was primarily a reaction to the Marcos administration. Splinter factionsfrom these groups such as the Abu Sayyaf have carried out bandit and terrorist activities throughoutthe country especially in Mindanao. The World Trade Center attack in New York brought to fore thealliance of these local groups with international terrorists. Activities meant to quell these terroristshave elicited support from affected countries such as the United States and England. 103

Case Study: CEMEX with a Heart: A Holistic Approach to Community DevelopmentCEMEX With A Heart:A HOLISTIC APPROACH TO COMMUNITY DEVELOPMENTby Charmaine Nuguid-Anden and Joy Sajonas11. IntroductionI n 1999, the people of Naga, Cebu learned that a new management team was taking over the APO22 Cement Plant,which is nestled within their community. The plant is a source oflivelihood for the residents but also posed health and environmental CEMEX Mission:hazards for the community because of its quarrying activities. Thus,it was with great interest and wariness that the community greeted To serve the globalthe news of the entry of CEMEX Philippines in the APO plant. building needs of its customers and build valueThe APO cement plant is the second cement plant acquired by for its stakeholders byCEMEX Philippines, following the entry of CEMEX in the Southeast becoming the world’s mostAsian market in 1997 through its purchase of the Rizal Cement efficient and profitableplant in Antipolo City, Rizal. CEMEX, a global company engaged in cement company.the business of cement, is considered one of the most efficientand profitable cement companies in the world. It has also developeda reputation for strong commitment to the needs of itsstakeholders, including the communities in which they operate.Newspaper articles commend CEMEX Philippines as being at the forefront of community projects,describing it as the business with a social responsibility and with excellent community relations.3This case explores how CEMEX Philippines has addressed the concerns of the communities aroundthe APO Cement Plant and how it has created a healthy and mutually beneficial relationship with thecommunity members. 107

2. CEMEX ProfileThe CEMEX Group of Companies is one of the three largest cement companies in the world, operating infive continents (North America, South America, Europe, Africa & Asia) and with more than 77 millionmetric tons of production capacity. Founded in 1906 and with its main office in Mexico, CEMEX is in thebusiness of production, distribution, marketing and sale of cement, ready-mix concrete, aggregates andclinker.4 It is the world’s largest trader of cement and clinker and is also the leading producer of whitecement. The company owns 51 cement plants and is a minority partner in 17 other plants.As a global company engaged in a business that draws environmental concerns from the different sectorsin society, CEMEX recognizes its responsibility in ensuring that its operations all over the world meet themost stringent environmental and health regulations. This is addressed through its significant use ofsophisticated information and production technology in all its plants and affiliates around the world. Also,the company recognises that its commitment and efforts to continuously improve performance in theEnvironmental, Health and Safety areas have significantly contributed to CEMEX’ outstanding economicresults over the past ten years.CEMEX also ensures that its values as a company are practised in every country where it operates throughits Code of Ethics. This Code is a confirmation of the company’s commitment to entrepreneurial integrityand to social responsibility. Developed in 1999 with the purpose of consolidating and strengthening theCEMEX identity globally, the Code serves as the company’s ‘bible’ in its relationship with its employees,customers, communities and other stakeholders and guides its activities and the way the company operates(i.e., environmental responsibility, health and safety in the workplace, financial control and records, etc.).As embodied in the Code of Ethics, CEMEX’s role in community development programs is one of directparticipation through legitimate organizations in programs and actions designed to promote integration,development, and improved quality of life in the countries where it operates. This participation mayinclude counselling, managing, sponsoring, or any other specific support involving products, assets and/orservices.As to the role of CEMEX employees in community development, CEMEX supports the participation of itsemployees in actions and events that contribute to the development of the community and organizationsthat foster communal growth, provided such participation does not interfere with their job performance.As will be gleaned in succeeding paragraphs of this study, the number of rewards and awards received byCEMEX are fruits of the CEMEX’s commitment to environmental conservation, where funds are allocated108

Case Study: CEMEX with a Heart: A Holistic Approach to Community Developmentand internationally recognized plans are adopted to ensure the best use of our natural resources. Asa commitment to the community, CEMEX proactively participates at all times in public and privateorganizations engaged in developing and maintaining the ecological balance. Furthermore, the companycollaborates in the design and improvement of environmental regulations in line with the company’s plansand programs.3. CEMEX in the PhilippinesCEMEX Philippines is the country’s third largest cement producer with its Solid Cement and the APOCement plants located in Antipolo, Rizal and Naga, Cebu respectively, producing about 6 million metrictons of cement every year. Because of the quarrying activities related to cement production, CEMEXPhilippines like any other company in this business must comply with provisions in the Philippine MiningAct and the Philippine Clean Air Act (i.e., community hosting, environmental regulations, complianceon dust emissions etc.). It must also contend with communities wary of the possible hazards that theplants’ operation could bring to their livelihood and environment. This reality is not lost in the wayCEMEX Philippines runs its plants in the country.CEMEX takes pride in its efforts to integrate sustainable development practices in its operations globallyrecognizing that adherence to these contributes significantly to its efficiency. It is no different in the caseof the company’s plants in the Philippines. Its two plants each have an ISO 14001 certification for theirEnvironmental Management Systems. Annual reforestation activity is also conducted in areas near thequarries to ensure that the environment around the cement plants is protected. To conserve water, therejected water from the reversal osmosis system in the APO plant is reused for green area irrigation and isa water source for a nearby man-made lake.Aside from its environmentally sustainable development practices, the company is also proud of itsactive engagement with the communities near its cement plants – giving flesh to social developmentbeing a part of sustainable development. CEMEX head office considers CEMEX Philippines as a “leaderin community involvement across the CEMEX family world-wide,” using as its framework, the avowedprinciple for community relations explicitly written in its Code of Ethics mentioned earlier.Through its affiliates, the company is actively engaged in development programs for its communities.These programs include education and capability-building support, environmental rehabilitation of quarryingaffected plant sites, health promotion and some infrastructure assistance to the communities. 109

In 2002, the Philippine National Red Cross (PNRC) cited CEMEX Philippines, through its Solid Plantoperations, for its dedicated service and commitment to assist communities through volunteerismand educational programs, including bloodletting, first aid and basic life-support activities.The same year, Antipolo First Lady Mrs. Josefina Gatlabayan (wife of the Mayor of Antipolo City, northof Manila) commended CEMEX Philippines, through the initiatives of the Solid Ladies Club, of itsSolid Cement Corporation, for its dedication to community building and for pioneering work in upliftingthe state of public school education through the Isang Lapis, Isang Papel (One Pencil, One Paper)program and applauded their efforts in providing proper nutrition to public school children by meansof its Feed a Kid project.54. CEMEX and the Community: The APO Cement Plant ExperienceOf the CEMEX affiliates in the Philippines, the APO Cement Plant stands as the company’s showcase ofenvironmental and community responsibility. It can be the pinnacle of its community relations across itsplants world-wide in terms of committed rehabilitation – and for good measure. The APO Cement Plant isone of the oldest cement plants in the country. Located in Naga, two hours away from Cebu City (thecountry’s oldest city, located in the Visayas), APO passed through two owners before CEMEX. Then, theplant was notorious for the dust emissions inherent in its operations, which posed health problems to thepeople living near the area. Previous owners had to set up extensive health facilities in nearby communitiesin attempts to mitigate its impact. The notoriety of the plant left a bad impression on these communitieswho had to put up with health and environmental hazards brought about by the very presence of the plantin their area.When CEMEX Philippines began to manage the plant in 1999, it instituted several mechanisms to ensurethat APO would stop being a health hazard and would not cause any damage either to the communities orto the environment. This was done primarily through the installation and use of the latest technology incement production to minimize dust emissions. The company also addressed the concerns of the thensceptic community, scarred by their experiences with past plant owners, through continued support forcommunity development and environmental rehabilitation. Senior company officials and plant managersinteracted with the community to show their commitment and gain their support towards thesedevelopment efforts. Today, APO has become a source of pride for most of the communities around it.6110

Case Study: CEMEX with a Heart: A Holistic Approach to Community Development5. CEMEX With A HeartCEMEX Philippines is actively engaged in community relations with the communities near the APO plantinvolving the families of APO employees who volunteer in various communities all over Naga. The APOplant follows a Social Development and Management Plan and an Environmental Protection andEnhancement Program in the implementation of community development programs. Corporate citizenshipactivities are mainly driven by these two plans. Previous corporate citizenship activities include concretingthe neighboring roads, rehabilitation of public parks, assistance in improving the waste disposal system ofcommunities and providing blood donations. The company also closely coordinated with the local clergyin reviving a parish church, with the international CEMEX management providing funds for this endeavour.This has earned CEMEX Philippines the reputation of being the strongest community relations implementerthroughout the entire company (using the same Community Relations criteria as outlined in the Code ofEthics).5.1 …For the CommunityIn baseline studies conducted by CEMEX Philippines for its APO communities, it was found thateducation and livelihood are the most pressing needs of residents. Thus, the company, in partnershipwith the Philippine Business for Social Progress (PBSP), developed a 2-year social investment programfor its communities dubbed as the CEMEX With A Heart Program. The program includes infrastructuresupport and capability building and is implemented by CEMEX Philippines through funding supportand corporate volunteering. CEMEX With A Heart has become the company’s strategic framework forits community relations projects.The program’s first major initiatives are the donation of personal computers and the construction of acomputer laboratory to the Naga National High School (NNHS) in Cebu. This is CEMEX Philippines’ responseto the call of the government for increased business sector support in the area of education given thesector’s meagre resources. It is also driven by the company’s belief that through information technology(IT), greater learning opportunities can be provided to the country’s youth.The 1,500 students of the NNHS are not the only ones who benefit from the computer laboratory and theten personal computers that CEMEX Philippines donated. Out-of-school youths in the Naga communityare also included in the computer training being held by NNHS on Saturdays. Aside from the company’sdonation, CEMEX Philippines also arranges for its employees to participate in the project through teacher-training courses and tutoring sessions. Through these volunteering activities, employees are able to sharetheir expertise in IT by teaching the students the rudiments of computer education. 111

CEMEX Philippines’ contribution to a better learning environment for the students of the NNHS isdeeply appreciated by the school’s principal, Ms. Luz Estrera. The principal said that they are fortunateto have received the donation, which has enabled the students to learn, develop and benefit. TheProvincial Government of Cebu also commended CEMEX Philippines for its contribution to NNHSthrough Resolution No. 448-2001. The company was cited for its efforts in helping the students andfor bringing hope for the entire community.In 2002, the APO Multi-Purpose Complex was inaugurated. The Complex, which houses the APOChapel, a gymnasium, tennis court, playground, and a multi-purpose building, serves as a compoundwhere employees and community-members alike can participate in recreational activities. The Complexis equipped with facilities that allow for interaction between and among the employees and thecommunity in an informal setting which contributes to stronger community relations.CEMEX Philippines also uses the Complex in other development projects such as site for company-initiatedlivelihood training programs and social activities for the community. Livelihood training programs conductedby the company in cooperation with the government agency, Technical Education and Skills DevelopmentAuthority (TESDA), are on cooking, reflexology, cosmetology and décor-making. Social activities held inthe complex for the community members include a mass-wedding ceremony, family picnics and sportsactivities like tennis, basketball etc.5.2 …For VolunteerismOther corporate citizenship initiatives continue to be implemented along with the CEMEX With A HeartProgram. The APO Ladies Club is an association of the wives of APO employees as well as female employees,which implements several development activities for the communities including a free monthly medicalmissions, tree planting and livelihood trainings conducted on a regular basis. Since the plant operates ona 24-hour basis, the employees themselves have limited capacity for volunteering activities and are notable to participate in the community activities as often as they would have liked. (Note: Employees referredhere are the male employees, that’s why the emphasis is given to the initiatives of the Ladies Club and thefemale employees. But this is not to say that male employees do not participate in the community relationsactivities, only that they have limited time compared to the female employees and the Ladies Club members.)As such, the Ladies Club becomes the viable alternative for corporate volunteering.The volunteering projects of the Ladies Club not only benefit the communities, but the employees as well.According to Mr. Jose Ramiro “Boy” Hilado, the plant’s Environment, Health and Safety Officer, “The activitiesof the Ladies Club allow us to see our families while we’re in the plant.” The predominantly male employeepopulation said that these company-sponsored activities provide them with a venue to interact with theirfamilies and allow their family members to understand the nature of their work while at the same timecontributing to the community’s well-being.112

Case Study: CEMEX with a Heart: A Holistic Approach to Community DevelopmentThe CEMEX Code of Ethics “supports the participation of its employees in actions and events thatcontribute to the development of community and organizations that foster communal growth.” Atpresent there is no system that allows individual employees to volunteer directly to the community.The Ladies Club and environmental lectures are the only activities where employees and their wivescan participate. Lectures made by personnel on environmental impact are considered by the companyas mentoring and are included in the Key Result Areas and personnel assessment of the concernedstaff.CEMEX Philippines recognises that the opportunity for employee volunteerism is growing as they engagein more corporate citizenship activities. The company is now expanding corporate volunteering to supportthe educational upgrade program for the employees and is working towards institutionalizing corporatevolunteerism in the APO plant.5.3 …For the Environment: In Harmony with NatureAs a result of its efforts in rehabilitating and protecting the environment around the plant, CEMEX Philippineswas the recipient of the Philippine Mineral Industry Environment Award (PMIEA) for its quarry operationswithin its first year of managing APO. PMIEA is the highest award given by the President of the Philippinesfor excellent environmental performance in the industry. The APO cement plant also received a citationfrom the Philippine Cement Corporation (Philcemcor) during tests held between July and December 2000.Philcemcor praised APO for exerting exemplary efforts in maintaining consistency in quality within theprescribed standards for Portland Cement (Type 1).An annual tree-planting effort was also initiated in the APO community. With the aid of the Ladies Club,reforestation efforts have been started and sustained along the quarry access roads and on the limestonehills of Naga. In addition, the Ladies launched a Waste Segregation campaign in the plant communities ofInoburan and Tina-an, Naga. Armed with posters and leaflets, they promoted the virtues of proper wastedisposal in caring for the environment. Recycled oil barrels were even donated to each Barangay office foruse as garbage cans. Under Resolution 2116-2002, the Sangguniang Panlalawigan of Cebu commendedthe APO Ladies Club for “distributing and placing waste segregation posters and flyers” in Naga, Cebu.To ensure that APO complies with environmental regulations, the plant employs the strictest availabledust emission screening technology (i.e. electrostatic precipitators). Although this technology does notguarantee zero dust emission, it ensures that the plant operates within the “allowed emission cap” prescribedin the Clean Air Act, according to Mr. Hilado. He also mentioned that there is a fail-safe system in theplant that shuts down the whole operating line if the precipitators break down and cannot be repairedwithin a reasonable time. This will prevent any undue emissions while the precipitator is undergoingrepair. 113

CEMEX is recognized world-wide for focusing its efforts on environmental protection. Among itsmany awards include The World Environment Center’s 18th Annual WEC Gold Medal for InternationalCorporate Environmental Achievement for demonstrating pre-eminent industry leadership andcontribution to world-wide environmental quality.CEMEX Chairman and CEO Lorenzo Zambrano strongly endorses programs for the protection of theenvironment. “We are building a better future by using the most advanced technologies and eco-efficientprocesses. As a global company, we are fully committed to the protection of the environment, and we willcontinue to join forces with governments, renowned NGOs and communities to safeguard nature andpromote a deeper ecological culture around the world,” Zambrano.The Jury, an independent body of international environmental experts, cited CEMEX for developing aformal strategy for environmental policy and sustainable growth. Its call for a sustainable developmentfound a partner with the World Business Council for Sustainable Development (WBCSD), along with nineof the largest cement companies in the world.CEMEX’s main thrusts and the focus of sustainable development initiative are climate protection, fuelsand raw materials, employee health and safety, emissions reduction, local impacts and internal businessprocesses.The joint statement issued by CEMEX with other companies, said: “Sustainable development provides uswith a comprehensive framework for tackling some of the biggest issues facing the industry today, like theclimate change. We believe it is central to our progress toward creating effective, efficient businessesin the 21st century.” Likewise, the Cement Sustainability Initiative “aims to work with other sectors ofsociety who have important roles to play in helping us address these key issues. Most importantly, weactively invite other cement companies to join us in the journey toward a more sustainable future.”114

Case Study: CEMEX with a Heart: A Holistic Approach to Community Development6. Rewards and ChallengesCEMEX Philippines continues to adhere to national and local environmental regulations and to protectthe communities from potential health risks that the APO’s operation might bring about. Cooperationand coordination with local officials and the members of the community and implementation ofcommunity programs like the CEMEX with a Heart shows the company’s sincere efforts at maintainingharmonious relationships with its stakeholders.The local government of Naga is generally supportive of the projects that CEMEX Philippines implements.Officials consider CEMEX Philippines as instrumental in the revival of the plant and the local economy.Still, they maintain objectivity in their dealings with the plant owners to ensure that this does not compromisetheir mandated responsibility of maintaining the balance between economic development and environmentalprotection. Officials continue to seek the establishment of a stronger coordination with the EnvironmentalManagement Bureau of the Department of Environment and Natural Resources to further educate themon the provisions of the Mining and Clean Air Acts.As the scope of CEMEX Philippines’ corporate citizenship initiatives expand to include supply chain andother priorities, the company’s Code of Ethics will serve as an internal guiding framework on how thecompany will address its growing social responsibility. Given its importance in the development of thecompany’s culture, the Code will enable CEMEX Philippines’ to move towards this expanded role. Thecompany can also continue to look at the Mining and Clean Air Acts as another guide in institutingcorporate citizenship initiatives.CEMEX Philippines needs to further strengthen its interaction with the plant’s stakeholders – localofficials, community members, environmental regulators, etc. – to win their continued support forthe company’s programs, while at the same time gaining the confidence of those in the communitywho remain wary of the company. Dialogues, focus group discussions and employee volunteerism aresome of the measures that CEMEX Philippines can further utilize towards this end. The inclusion ofthe Parent-Teacher-Community Association (PTCA) in the CEMEX with A Heart Program is worth-noting. PTCA is key in getting this support since it brings together a majority of the various sectors ofthe community.Reflective of the company culture, APO is standardising and systematizing its community relations activitiesin a manner similar to its environment programs. According to Mr. Hilado, the itemized and systematicmonitoring of their community activities will provide a basis for future improvement. Other mechanismssuch as a community report card, aside from the regular ‘climate’ survey being conducted, may also beused by the company to help them gauge community feedback on the different aspects of APO’soperations. 115

Instituting volunteerism for APO employees will remain a challenge for the plant given its rigorous24-hour operation and the shifting schedule of the employees. At present, CEMEX Philippines notonly supports institutional employee volunteerism but also the volunteering initiatives of a numberof its employees i.e., teaching computer classes, tree-planting, blood donation, etc. This recognitionof the importance of volunteerism, evolving from an ad hoc to a strategic activity to support APO’spriority social investment activities, is a strong indication of the company’s commitment to create aculture of corporate volunteerism.CEMEX now strategically plans its community activities to allow its employees to participate in volunteeractivities without hampering the plant’s operation. Establishing an institutionalized volunteerism systemis a step towards more active employee participation in community relations.7. Ways ForwardUsing the PTCA as a springboard, CEMEX Philippines has an opportunity to establish a linkage with alocal organization that also includes the local government unit and other stakeholders (i.e., keypossible groups where the local organization may come from – local officials, community members,environmental regulators etc. – are critical in gaining more support for the company’s projects).Originally, the multipartite monitoring team required by law for environmentally critical projectsseemed to have served this purpose. But on closer look, the multipartite did not seem to fully addressthe needs of some sectors in the community. Thus, there is a social empowerment need for a moreinclusive group that will address the wider concerns of the community, which PTCA may be able toprovide.The CEMEX with a Heart Program is CEMEX Philippines’ main initiative towards empowering thecommunities around the APO Cement Plant. Through the program’s livelihood and education projects,the company is providing the communities with alternative opportunities, thereby reducing theirdependency on the plant. At the same time, by institutionalizing corporate volunteerism via the APOLadies Club and through other company-sponsored community development activities, CEMEX isproviding a mechanism for better interaction between its employees and the members of thecommunity. This is essential in strengthening the mutual commitment of both the company and thecommunity in ensuring a harmonious and peaceful co-existence.Through volunteerism activities, CEMEX Philippines employees can also serve as a link between thecompany and the community. They can gather important feedback, which can be used by CEMEX in116

Case Study: CEMEX with a Heart: A Holistic Approach to Community Developmentimproving its existing community initiatives and in developing newer and more responsive communityprojects.8. ConclusionThe CEMEX Philippines experience with its APO plant has enabled the company to earn a reputationas the strongest community-relations implementer among the other CEMEX plants all over the worldas attested by the company’s head office. The implementation of an integrated development programfor its nearby communities, the CEMEX with a Heart Program, and the strong corporate volunteerismbeing instituted by the company, both through the APO Ladies Club and through individual employeevolunteer activities, has also earned the trust of the community. This was no easy task consideringthat these communities had doubts about the company’s sincerity in protecting them and theenvironment from the harmful effects of a cement plant.But through the use of the latest environmental technologies in APO’s operation, committed communityassistance and dialogues with community members, CEMEX Philippines has proven with time its sincerityin creating a healthy and peaceful co-existence with members of the host community.Today, the company takes pride in the fact that it receives almost no complaints about its operations andenjoys a mutually beneficial relationship with its host community – testimony of how CEMEX was able toachieve success with its community relations in the APO Plant through a holistic approach to development.ReferencesSorsogon, Reynaldo. Basic Information on Mt. Apo (1983)CEMEX Company Profile (PBSP, 2002)CEMEX Code of Ethics (2002)CEMEX Philippine’s Corporate Communications Report for 2002Interview with Mr. Jose Ramiro “Boy” Hilado and other APO employeesInterview with some residents of Naga, CebuMalaya Newspaper (November 20, 2002) 117

Manila Bulletin (November 20, 2002); Deedee Siytangco (December 3, 2002)Manila East Watch News (November 11-17, 2002)Philippine Business for Social Progress’ documents on the CEMEX With A Heart ProgramPhilippine Daily Inquirer (October 19, 2002)Endnotes1 National UNV - Business-Community Relations Specialist and Lead Writer, respectively.2 Named after Mount APO, the Philippines’ highest peak, 2954 m above sea level and located in theSouthern part of the Central Cordillera of Mindanao (Bukidnon Davao Cordillera, Davao del Sur).3 “Street Smart,” Mandy Navasero. Philippine Daily Inquirer, October 19, 2002 and Malaya November 20,2002; Manila Bulletin, Deedee Siytangco. December 3, 2002.4 Clinker is the intermediate product used in the manufacture of cement. Limestone, clay and iron oxideare calcined in a kiln at 1,450 centigrade to produce clinker.5 Manila Bulletin, November 20, 2002 and Manila East Watch News. November 11-17, 2002.6 Based on interviews with members of the community of Naga, Cebu.118

Case Study: Davao Light & Power Company Street Lighting ProgramDavao Light & Power CompanySTREET LIGHTING PROGRAMby Charmaine Nuguid-Anden11. IntroductionT he Street Lighting Program is a novel partnership between the Davao Light and Power Company and the City Government of Davao aimed at decreasing the level of criminality and projecting a secureand world-class city. The city was solely responsible in installation, distribution, maintenance and repairof the streetlights, including the assessment of which communities were in most need of light. The companydonated sodium bulbs and assemblies and other equipment that the City Government needed to implementthe program and provided technical assistance through employee volunteers and casual staff.The crime rate in pilot areas decreased significantly. According to most stakeholders (i.e., barangay2 leaders,trade officials, city planners, police officers), the project significantly contributed to the overall safety ofthe city. It had its greatest impact on the tourism industry, as several communities were able to open upcommerce, transport and recreation facilities even until late into the evenings.The success in the pilot areas became the basis for replication in the other parts of the company’s franchisearea with the local government’s capacity to support the program as a key consideration. From 1996-98,DLPC donated approximately 33,000 sets of streetlights costing Php132 million (approx. US$ 4.4 million)and provided technical assistance to the City. 119

2. Case Background and ContextDavao Light & Power Company is a power distribution company exclusively serving Davao City and themunicipalities of Carmen, Dujali, and Sto. Tomas as well as Panabo City in Davao del Norte. The companyhas a regular workforce of about 380 persons, and hires a sizeable number of non-regular staff mostly forrural electrification projects. As of year 2000, DLPC’s State customers number 225. Residential customerswere about 161,430, with a total consumption of about 26,285,376 kwH and approximately over 16%coming from outside Davao City.It is a subsidiary of the wholly-Filipino owned Aboitiz Group of Companies and is the third largest privatelyowned utility. Prior to the Electric Power Industry Reform Act of 2001 (Republic Act 9136) it served as thepower distributor monopoly in these areas, and also operates mini hydro plants and a standby diesel plant- one of the few utilities in the country with such capacity. R.A. 9136 aims to promote competitiveness inthe power industry through deregulation and opening up ownership of utilities to the general public.Davao City, known as the largest city in the world in terms of land area (2,440 sq. kms.), has a diversetopography ranging from urban cityscape to mountains and forest areas. Davao City has 180 barangaysand eleven political districts, and the City Proper itself covers less than 10 percent of the whole city. Thepopulation is roughly 1.2 million people or a population density of 491 person/sq. km. which is a far cryfrom Metro Manila’s seven million population.Despite the relatively low crime rate 7.37 cases per 100,000 as of 2000, the reputation of this city hasbeen marred by the general image of Southern Philippines as a dangerous place beset with insurgency,mistrust between Christian and Muslim population as well as those committed by purely lawless elementswho took advantage of the decades old Moro-Christian conflict. As a seeming hotbed of violent upheavalsduring the insurgency years, economic activity in the city was sluggish. Poverty was rampant and therewere very limited economic options for the people. For businesses that bravely chose to remain in the area,chances for expansion were poor and the cost of ensuring security of life and property directly affected thebottom line. Poor infrastructure in terms of roads, power and communications outside Davao City’s moreurban centre strongly contributed to the paralysis felt by both business and communities alike.The City Government of Davao was affected as revenues did not match the potential of the whole city.Davao City hosts the financial and educational centres of Southern Philippines (Mindanao Region) andserves as the gateway to the East ASEAN Growth Area (EAGA)3. Because it is outside the Southeast AsianTyphoon Belt with wide expanse of fertile land, Davao City has untapped potential for commercial agricultureand forestry. It also boasts many natural and cultural resources for ecotourism.120

Case Study: Davao Light & Power Company Street Lighting ProgramAccording to executives of Davao Light & Power Company (DLPC), the exclusive power distributor inthe area, the perceived poor reputation of the city not only directly affected the company in terms ofnarrowing its own investor pool, but also limited potential revenue growth as risk-fearing investors.Essentially, DLPC’s client base was largely residential, clearly showing the strong need for goodcommunity relations by the company. The company’s rural electrification program in effect was a wayto increase its customer base in the far-flung communities of Davao. However this could notcompensate for the need to obtain more corporate customers.The small budget obtained from a relatively meager Davao City income was not enough to address allissues related to peace and order (e.g. infrastructure, police services upgrade, etc.) According to the PoliceDepartment, projecting a sense of security was needed as well which could very simply be answered bylighting up identified security-critical places. In 1993 the City Government started conceptualizing thisinnovative crime prevention and tourist attraction plan, settling on the installation of bright sodium bulbsas these were more durable than traditional fluorescent lamps and could be seen even during foggy nights.This became the seed for a partnership between DLPC and Davao City aimed at igniting a massive lightingprogram that would extend to the remotest areas of the city.3. The First Spark. . .In response to the city’s call, the senior management of Davao Light started brainstorming on how thecompany could assist the city through the procurement of sodium lamps. In 1993, the acquisition cost ofone complete sodium lamp assembly was PhP19,000.00 (US$ 678.57). In 1996 when the street lightingprogram was started, Davao Light, in partnership with Florida Electric, was able to obtain brand newsurplus sodium lamps that only cost PhP8,000.00 (US$285.71) per set. This was further discounted to halfthe price. With the supply of bulbs assured, the City Government through then Mayor Rodrigo Duterte andDLPC through Executive Vice President and Chief Operating Officer (COO) Alfonso Y. Aboitiz entered intoa Memorandum of Agreement (MOA) on 28 November 1995. The City Government was primarily responsiblefor identifying the communities most in need of light.Under the MOA, the company donated sodium lamp bulbs, brackets and assembly and a utility vehiclewith a hydraulic basket for the use of the city for maintenance purposes. The company also agreed todonate additional bulbs for replacement purposes until the end of 1998, as well as provide technicalassistance to the city for maintenance of equipment and consumables. The city became solely responsiblefor the distribution, installation, maintenance and replacement of all streetlights. The city was alsoresponsible for all applications by the communities for streetlights and also for payments of the electricitycharges. Finally, the city pledged to provide a weekly status report of installed streetlights to the Company. 121

The city identified as priority areas those barangays the crime rate of which were risky to locals andforeigners, namely the Agdao to R. Castillo and Quezon Boulevard areas which were just within theperiphery of the city. “Recipient communities were also given responsibilities in order for them to feel thatthey are not just beneficiaries but stakeholders of the project as well,” according to Vic Sumalinog, theCommunity Relations Officer of DLPC. Communities have to monitor and report defective units to theirlocal leaders who have to report this to the city’s streetlighting staff, as well as maintain the units bytrimming tree growth that could impede the light coverage. The community officials also have to implementsecurity measures to ensure that bulbs would not be stolen.4. Lit Up a CornerIn 1996, Brgy. 22C Piapi in Quezon Boulevard had the reputation of being one of the worst barangaysin Davao City in terms of criminality. Prior to the streetlighting program it had a crime rate of 20% or2 to 3 incidences every month, statistics at the police office disclosed. In the first three months ofthe installation of mass lighting in the said barangay, the crime rate went down to 10 percentmonthly average. The police looked at the light installation as a major factor in their increasedcapability to respond to call for police assistance from residents in previously unlit areas.DLPC’s Legal Department and its Transmission & Distribution Division, provided volunteer technical assistancesuch as negotiation and drafting of the MOA, initial installation of the bulbs and the training of Davao Citystaff in installation, repair and maintenance of the units. The company’s Community Relations Departmentdeveloped information dissemination and public education program for the people’s project awarenessincluding TV, print and radio, which allowed not only the company but also the city to present promptinformation regarding the streetlighting to the general public.In 1996 alone, the streetlighting program installed over 1,400 sodium lamps in three phases and almostsimultaneously. While the good majority was very happy about the illumination of the city in agriculturalareas, farmers were less exuberant. Plants and crops located near the streetlights grew slowly. Departmentof Agriculture technicians said sodium light hampers the maturation process. On the advantage side, theactivity generated direct employment as the project created a streetlighting unit in the City Government’semploy. Sub-contractors for related services were also hired by the local government. These positive resultswere felt within the first six months of the streetlighting program, thus bolstering the resolve of the cityand DLPC to implement the program city-wide.122

Case Study: Davao Light & Power Company Street Lighting Program5. And the Light Grew Brighter. . .Due to the success of the program, DLPC after the term of the MOA in 1998 continued the project undera new lighting plan developed in consultation with the City Government. Under this program, barangaysor sitios4 could go to DLPC directly and apply for streetlight installations. Streetlighting served as thestepping stone for the electrification of a whole community, with the installation of primary and secondarylines, transformers, posts, wires and cables largely shouldered by DLPC upon the request of the barangay.Starting 1998, the company sees the streetlighting project as an expression of its corporate socialresponsibility.6. Darkness DiminishedFrom 1996-98, DLPC donated approximately 33,000 sodium lamp sets costing PhP132 million (approx.US$ 4.4 million), providing streetlights beyond the numbers originally planned for in the MOA. Accordingto the company’s Community Relations Officer, the company was willing to continue sourcing as manybulbs as the city needed.Also since 1998, streetlighting has become an integral part of the rural electrification program of thecompany. This is so because the combined program not only gives them light but energized their homes aswell. All communities that were recipients of the streetlighting program reported good results. Officials ofTugbok, a district near the City Proper supporting 18 barangays, said that there were increased investments,including the location of large companies such as Vitarich (poultry company) and Purefoods (foodmanufacturing) that paid about PhP145,000 (US$2,900) per month in local taxes. Community enterprisessprung up along the lighted areas, and public transport services were extended from 7 P.M. to 3 A.M.Community activities such as sports during the evenings became possible and incidences of civil misbehaviorwere reduced. Records at the Local Civil Registration Office, in fact, indicated a reduction in the birth ratesof areas served by the streetlighting project in the Tugbok Centre.Located some 30 kilometers from the centre of Davao City, Barangay Calinan was also one of the initialcommunity beneficiaries. Within the reach of the other 39 barangays from adjoining districts, Calinan wasconsidered strategic by both city officials and DLPC. Barangay Captain Jose Luis Villafuerte recalls that thebarangay had originally sought out DLPC for a donation of used computers, another community relationsproject of the company. Upon consultation with DLPC’s Vice President and Chief Operating Officer (COO)Al Aboitiz, the barangay chief found that Calinan was qualified for computer assistance. With the integratedstreetlighting/rural electrification program of DLPC, Calinan has prospered into a larger political andadministrative sub-unit servicing the local governance needs of all the nearby barangays. 123

On the whole, most community stakeholders (i.e., barangay leaders, trade officials, city planningofficers, police officers) said that the project contributed significantly to the overall safety of the city.These stakeholders attributed about 20% to 80% of the economic progress enjoyed by the relevantcommunities to the streetlighting project. It had its greatest impact on the tourism industry, asseveral communities were able to open up commerce, transport and recreation facilities until lateinto the night. According to Engr. Froilan Rigor of the Office of City Planning, the streetlightingprogram helped facilitate the image of Davao as an international city with a nightlife that could becompared to Manila or Singapore.There are perceived downsides though. Farmers with crops near the lights originally thought that anadditional bonus had been obtained as rice planted underneath the lamps was growing taller than normal.However, this turned out to be more of frustration as the rice was actually maturing later than normalwith very poor harvest results. Farmers though have been taking matters into their own hands by coveringthe lights with makeshift covers made from plastic and fertilizer bags.7. Effects on the Bottom LineThe company obtained a return on its investment, as payments by the city to the utility reached a highPhp12 million ($342,857.14) per month in 1998. The City Government recovered additional costs fromincreased taxes it collected from new businesses that sprung up in the lighted areas. However, the initialzeal of the city to “light up the streets” did have some setbacks.As the city overzealously accommodated streets clustered near tourism-belt areas, some barangays wereleft out which the city had to reallocate in 2001-2002 but not without some protest from the initialbeneficiaries. This nevertheless, did result in some savings for the City Government.8. As the Light Did Good. . .As a community relations program within a business proposition, the communities did not see themselvesas beneficiaries but as customers. The communities recognized the earlier donation of bulbs and lightstands as well as associated labor were a community relations activity of the company. But in general,people felt that the long-term goals of the company were commercial and therefore they consideredthemselves to be consumers, or communities/stakeholders with a higher stake. That is, they want toplay more significant roles in the identification of areas where sodium lamps should be installed.124

Case Study: Davao Light & Power Company Street Lighting ProgramThis gave both community and the company an even position based on mutual need and gain, albeitlimited, as DLPC was still the sole utility serving this franchise area. The company saw the streetlightingand rural electrification program as an opportunity to remain competitive in its franchise area because ofthe newly enacted Electric Power Industry Reform Act of 2001, which deregulated the power industry. Thecompany believes that its willingness to provide services even to the farthest corners of its franchise areaindicated its commitment to its community/customers. The recent electrification of Paquibato District,about 70 kms. from the City Proper at the cost of PhP6 million (approx. US$120,000) is indicative of thiscommitment. This area can very well be considered as Davao’s “last frontier”. It used to be the haven of thelocal communist rebels or the New People’s Army (NPA).The commitment for the program springs from the values that the company espouses. The Vision statementof the company, even though revised in 2000 after the streetlighting program started, clearly shows thatthe company styles itself not only as a leading corporate entity but as “a responsible partner on the roadto progress and development, essential to our community’s collective hope for a better life”.The employment of volunteers for this program indicates that volunteerism is ingrained in theemployees. Volunteering has been practised in the company since 1983, and has only recently beennamed by management as a key strategy to support communities. Recognizing that previous effortswere somewhat ad hoc in nature, DLPC is launching a major volunteering project on IT (InformationTechnology) education. As a unionized company, volunteering activities are coordinated through theLabor Management Council (LMC) and is considered a partnership between labor and management –“a common bond between owners and employees to share expertise and resources for the benefit ofthe community”. While there is no formal Memorandum of Agreement (MOA) on this partnership, thecommitment of both management and labor on these activities is enshrined in the latest CollectiveBargaining Negotiation Agreement between the union and management.DLPC conducts several corporate social responsibility (CSR) activities, but the streetlighting programis unique as it is the only program that marries the company’s business proposition with its corevalues, employing the talents of its staff to push forward a project whose benefit to the companydoes not immediately show. The design of the program clearly indicates that its benefits are morecognate than physically visible. Likewise, the design of the program shows that DLPC not only seesthe local government unit (LGU) of Davao City as its partner in terms of responsibilities and stake butthe recipient communities as well, ensuring that there is an implied partnership between the two.This suggests that the community is not just a beneficiary of the government and the company, butalso an active stakeholder in the actual implementation of the project. 125

9. And the Light Blazes OnAs a community relations program, the streetlighting initiative has been successfully implemented byDLPC. The program has achieved its primary goal of helping to deter crime and its secondary mission ofuplifting the communities wherein light was shone. As a partnership between Davao City and the company,the program has been successful in meeting the needs of each party for increased economic activitythus, indicating the investment nature of the project.At the same time, the company must endeavour to strike a balance in the communities between itsdevelopmental and business approaches, as the expectations of its community partners and customerscontinue to grow.Endnotes1 National UNV - BCR Specialist.2 As the basic political unit, the barangay serves as the primary planning and implementing unit ofgovernment policies, plans, programs, projects, and activities in the community (Local Government Codeof 1991 or Republic Act No. 7160).3 The ASEAN growth area is a development cooperation among the Philippines, Malaysia, Brunei andIndonesia seeking to do away with the borders of diplomatic bureaucracy.4 Sitios are components of the Philippines’ smallest unit of governance – the barangay or barrio.126

Case Study: Figaro Coffee Company’s Save the “Barako” BeanFigaro Coffee CompanySAVE THE BARAKO BEANby Charmaine Nuguid-Anden11. Introduction: The Philippines in the Coffee BeltC ircling the equator between the Tropics of Cancer and Capricorn, the ‘Coffee Belt’ is an area where countries like the Philippines, Brazil and Indonesia are located. The Coffee Belt has only two seasonsa year and the weather is a temperate mix of humidity, heat and cold. The Philippines was historically oneof the world’s top producers of coffee, with export earnings amounting to at least US$150 million before1986. However, output has dropped dramatically to only a total production of about US$500,000 or 500kg per hectare. Over the past ten years, 80,000 hectares were lost, with only about 120,000 hectares ofproductive coffee land remaining in mountainous areas and traditional coffee enclaves. This migrationaffects 60-80,000 coffee families, the majority of which are small farmers.2This was mostly due to developments that cut farming profitability. The Philippines’ once rich coffee landhad come reclassified as industrial or commercial land with increased land taxes. Farm-to-marketinfrastructure had not improved quickly enough in many of the country’s rural areas. Mechanization andincreased efficiency in other parts of the world had greatly brought down the price of coffee. Most coffeelands are in typhoon-prone areas as well, adding to the seasonal risks. Dropping profitability led manyfarmers to abandon coffee growing.This supply development did not match the domestic demand which continues to rise at 27% per year, ofwhich instant coffee consumption was four times that of gourmet coffee demand. 127

2. Know Your BeanThere are five commercially known coffee bean varieties worldwide: Arabica, Robusta,3 Excelsa, Stenophyllaand Liberica. The most popular beans in use all over the world are Arabica and Robusta. The former has amore subtle and distinct flavor and is usually used for gourmet coffees. However, due to weather conditions,it cannot be natively grown in the Philippines except in some mountain areas, and therefore is mostlyimported. Robusta on the other hand is grown in many parts of the country. Due to its more full-bodiedflavor, Robusta is used mostly for instant coffee. The Excelsa and Stenophylla varieties are not cultivatedcommercially in the Philippines.Liberica is known to be an indigenous product in only three Asian countries, including the Philippines,making the bean a very unique and potentially lucrative product. The term ‘Barako’4 in the Philippines hasbecome a generic name for the coffee grown and roasted in the Batangas region (just north of Manila). Intruth, Barako is the Philippine Liberica known for “its particularly strong taste, powerful body and adistinctly pungent odor.”5 Because of its homespun image, domestic demand for Barako had slacked off infavor of international Arabicas and large-scale production of Robusta. Saudi Arabia has been the onlyknown export market for Barako. As a result, the Barako is now in danger of extinction.The presence of large corporations with very high demand for Robusta coffee had shifted most coffeeproduction to this variety. However, as corporations buy the crop with the prevailing low world price,coffee farmers have begun to shift to other crops and some have chosen to sell off their lands.3. Figaro Coffee Company and the BarakoThe Figaro Coffee Company is a popular specialty coffee store in the Philippines that is 100% Filipino-owned. Established in 1993, it is based on the concept of a complete store where “Filipinos can get theperfect coffee and all the necessary accoutrements for coffee making” that can compete internationally.From only two employees, a managing partner and a kiosk in the Makati Mall of the Ayala Centre, thecompany now has 31 outlets encompassing kiosks and cafes (including its first international store in HongKong that opened in 2001). This total includes 12 that are run by franchisees. The company’s product lineincludes specialty roasted coffees and various coffee-related paraphernalia sold at retail. The companydoes not own roasting facilities, but employs the facilities of a sister company, Boyd’s Coffee Company.Aside from the superior-tasting coffee that a customer can enjoy in the Figaro Cafes, the company alsooffers a host of freshly roasted beans on retail. Among the selection is Barako and from the time it wasintroduced in 1999, Figaro Barako has become a bestseller. The ‘Save the Barako’ cause has somehowgiven the coffee added value as portion of the bean sales is channelled back to into a project to promote128

Case Study: Figaro Coffee Company’s Save the “Barako” Beanthe revival of the Barako. The project encompassesawareness programs, new plantings, research, andtargeted marketing, and is coordinated with the Box 1. Figaro Coffee FoundationFigaro Coffee Foundation (see Box 1). The Figaro Coffee Foundation was formed in 1998 with a singular thrust – to boostMeanwhile, as the consumption of Barako Filipino coffee production, particularlyincreases, a greater need arises to keep the Barako. As part of this process, it providesproduction going which gives all the more reason aid to the remaining local coffee families.why Barako needs to be saved from extinction. The foundation’s activities are mostlyThe continued increased demand for Barako, on communications-focused: art exhibits andthe other hand, allows the advantage of bringing seminars shedding light on the domesticthe price of Barako to a viable level that benefits coffee industry situation. Geared towardsboth the farmer and the retailer. obtaining consumer sympathy, the foundation’s initial activities were aimedThe waning supply of Barako beans prompted the at securing a steadily increasing domesticcompany to be more aggressive in securing supplies. demand for Barako coffee. Another aspectThe ‘Save the Barako’ campaign is its showpiece of the foundation’s work is linked to theeffort, and has earned the company a reputation as City Blends.6 These are specially designeda company that cares for the coffee farmer. coffee packs indicating particular cities where specific charities are chosen asThrough Figaro’s customer-loyalty scheme called beneficiaries. All City Blend beneficiariesCoffee Club, the company organizes farm tours are children’s causes. As an example, thetwice a year wherein coffee enthusiasts are shown Makati Blends coffee benefits the ‘Childrenthe process of coffee harvesting and planting. Since Hour’, a charitable institution based inthe company is primarily a coffee distributor and Makati. Using the same strategy as Citycoffee shop operator, it did not have prior experience Blends, the company developed the Barakoin actually growing coffee for commercial Blends, the proceeds of which go to theproduction. operations of the foundation.4. Looking for the Barako, Finding a CauseAs the company started to get recognition as a major coffee chain, especially with the arrival in thecountry of international coffee brands such as Starbucks, Figaro was in search of the popular Barakocoffee. Quite serendipitously, Figaro’s CEO Pacita Juan met Father Roger Bagao, a coffee farmer/priest inTagaytay City who headed a farmer’s coffee cooperative. Father Roger hailed from the southern provinceof Bohol and has made coffee his life. A member of the Divine Word Seminary (SVD) in Tagaytay, Father 129

Roger chose to live among the coffee-farming people. He knew that to assist them to attain spiritualawakening or enrichment, he first had to learn what crops they grew, how they made their livelihoods.This meant first helping them to fill their stomachs, and later reaching their souls. So COFFEE was it.He organized a farmers’ cooperative that ran a coffee mill known as SMSK.Pacita Juan met Father Roger and asked him to show Figaro the other side of coffee – farmers, differentvarieties and where they grew, coffee in the south, coffee in the mountains. When Pacita was looking forthe native Barako, Father Roger could only tell her that this variety or species was no longer profitable astheir yields were low and Nescafe (the biggest processor) would have no need for the Barako. This saddenedFigaro, as Barako is an important part of Philippine coffee history. “How do we change the tide?” she askedFather Roger. “Can we start planting Barako? How do we tell people about this sad fate of this species thatis so popular among our people?” These questions made Figaro, with the help of Father Roger, establish afoundation to address the needs of the Philippines Coffee Industry – now known as the Figaro FoundationCorporation (see Box 1).The first project of the foundation was general coffee awareness-driven: The Coffee Farm Tour is now heldevery January in Cavite or Batangas, two provinces appropriate for a day trip. The second project is Barakoawareness-driven. The Barako is slowly being cut down due to its ‘low’ demand among big processors.However, there is growing demand for Barako from specialty roast and ground processors in the Philippines,and for export to the Middle East. A related foundation project is called ‘Barako Tree Planting’. Launched in2000, this project is run every July or August. The key challenges facing the tree-planting project arewhere to get seedlings and where to get land. Luckily, Father Roger found land during 2000 and 2001.After 2001, however, the foundation met with some problems regarding land ownership and could nolonger access the first plantings to check on progress. In the same year, Father Roger introduced CaviteState University (CaVSU) and its research head, Dr. Andy Mojica to the Figaro Foundation. Dr. Mojicawould be one of the keys to Barako seedling propagation, and he would also be a major part of thePresidential Task Force on Coffee Rehabilitation prompted by Figaro’s persistent invitation.In January 2002, Figaro (now working with Dr. Mojica’s group) began to visit CaVSU for its AnnualFarm Tour and also to work with them on Barako seedling supply, a task that used to be performed byFather Roger. Meanwhile, Father Roger went on a sabbatical in 2002 and Figaro was subsequentlyinvited to be a member of the Presidential Task Force on Coffee Rehabilitation (see below). In thissame period, the coffee town of Amadeo was visited by President Gloria Macapagal-Arroyo for thefirst-ever Pahimis festival to signal the start of today’s Filipino coffee revolution – a peaceful revolutionof going back to coffee farms to increase production to turn the country from being a net coffeeimporter to a net exporter as it was until 1990.In Amadeo, Figaro met Mayor O.J. Ambagan who gladly offered his land for the next Figaro Tree Plantingactivity. In the same year, Leisure Farms, a first class farm community invited the Figaro Foundation to130

Case Study: Figaro Coffee Company’s Save the “Barako” Beanundertake another tree planting activity in Lemery, Batangas which would be provided with irrigationand all the care needed for a first class farm.These efforts have now grown into a series of projects with the local government of Amadeo such as the‘Adopt-a-farm’ program, coffee farm tours, and the organization of a coffee cooperative to promote ‘CaféAmadeo’ – a ‘monobranding’ exercise to promote Amadeo’s coffee roasters who used to sell under differentbrand names.More than just to sustain its core product or core business, Figaro has become the trailblazer on how ‘outof the box’ ideas can be used to encourage farmers to plant the Barako again, motivate local governmentsto do their part and get cooperatives working toward one goal.Through its partnership with the municipality of Amadeo, Figaro will be able to plant around 30,000Barako trees in and around the Amadeo town providing farmers with a niche product that can be theirticket to higher selling prices and export potential of a value-added product branded with the Figaroname.Figaro took up the cause of the Barako when everybody else thought it an impossible task. But because ofits belief in the cause, Figaro enjoined small groups who equally believed in the integrity of the cause andsubsequently slowly built awareness towards a greater mass. Today, Barako has gained many supportersand made a dream a possibility, further proof that an inspired vision that is led by a credible company tosustain its own industry is the heart of corporate social responsibility. Ultimately, ‘Save the Barako’ hasmoved even the simplest coffee customer to help sustain this once-threatened variety – that is reward initself.5. The Coffee Board7Strengthened by this experience, Figaro has since been invited to be the private sector representativefor the Presidential Task Force on Coffee Rehabilitation. Letting go of its initial misgivings to partnerwith government, the company has found that a multi-stakeholder partnership can provide thedynamism and sustainability that it needed to address the Barako challenge. The Task Force is composedof the Cavite State University, various government agencies including the ‘One Million Jobs Program’of the President, creditors, the Makati Business Club (a private sector think tank primarily representingtop Philippine business interests), the local government of the town of Amadeo in the Cavite province,millers and processors and another international coffee retailer chain, Seattle’s Best. Surprisingly, nobig coffee producers were included in this task force. Figaro’s Pacita Juan co-chairs the Task Forcewith a particular focus on work in the private sector. This includes the merchandising coffee as a 131

group using the Kape Isla seal (the seal of the Philippine Coffee) both domestically and internationally,and enjoining hotels and such to serve Philippine coffee.This Coffee Task Force is set to implement a coffee fertilization and rehabilitation program in line with the‘One Million Jobs Program’. With plans to establish the program in 22 provinces, Cavite (beside MetroManila) will serve as the model province with activity jumpstarting from the town of Amadeo. The coffeeprogram includes spreading techniques perfected by CavSU and Nestle Philippines to willing farmers, witha loan of about Php 15,000 per farmer (US$300). Both Robusta and Barako are targets for rehabilitation.In May 2002, the Task Force was elevated to become the National Coffee Development Board.In line with this new duty, the ‘Save the Barako’ campaign has kicked into a higher gear as it providesFigaro with land for its new model farm in Amadeo. With Barako prices three times higher than for othervarieties, this allows for a greater profit margin for farmers. Figaro is implementing a system of contractfarming that allows for a controlled supply of Barako as a niche market alternative, thus ensuring thatthere will not be a glut in Barako supply. In order to minimize dollar reserve losses due to importation,approximately 20,000 MT (approximately 1.5 MT per hectare) is expected to be produced each year. Allthese targets coincide with the lifting of tariffs due to WTO agreements, but as Figaro’s CEO Pacita Juanquipped during the third Barako tree planting in Amadeo in August 2002, “we are a small company and weknow this is something we cannot do without our partners – the farmers, the people of Amadeo, theacademe…”6. Lessons LearnedAs a medium-size company without the mass marketing resources of larger firms, Figaro has strength inspecialty store marketing and communications strategies for advocacy and education purposes. The companysees itself as an agent of volunteerism not only because it inspires coffee advocacy for betterment of theindustry.Originally seeing consumers as their primary community, the company adopted charities in the citieswhere it had its strongest market share (City Blends). However, as supply chain issues emerged, itbecame obvious that the company’s view of its community has expanded from its consumers to thefarmers that produce its products. Given its youth, the company had been cautious about buildinggovernment relationships because such partnerships can be notoriously short-lived. It is highlyremarkable that a company of such a small stature was willing to take it upon itself to secure thefuture of a dying coffee bean.132

Case Study: Figaro Coffee Company’s Save the “Barako” BeanHowever, the company has needed guidance to develop the mechanics for more long-term communityrelations’ activities. The company’s association with the League of Corporate Foundations and other thirdparties with more experience in community relations has helped. The company’s participation in theNational Coffee Development Board has allowed Figaro to further expand its experience in multi-stakeholderdealings as well as erase some pre-conceived notions of government. Yet as the Coffee Board is a newendeavor, there must be careful monitoring of the progress of the Barako under its wings.While the task of rehabilitating the local coffee industry and saving the Barako remain a formidableundertaking, Figaro and its various partners now have the right channels and networks to solidify andintegrate their efforts as a collective unit giving them a greater fighting chance for survival.Figaro remains committed to championing the cause of Barako and leading in rebuilding the Philippinecoffee industry. With its clear vision to give back to the industry it serves, Figaro’s undaunted spirit shouldenable the company to see this project through to its completion with the support of both Filipino coffeeconsumers and producers.Endnotes1 National UNV - BCR Specialist.2 The bulk of Filipino coffee is grown by small, independent producers, a consistent production patternglobally according to the Fair Trade Foundation. See: http://www.fairtrade.org.uk/about_standards.htm3 Also known as ‘Coffea Canephora’.4 Barako takes its name from the Tagalog word for ‘wild boar’. These creatures are fond of dining on theplant’s leaves and berries. The Barako tree is bigger than other varieties; therefore, it takes up more spaceon the farm.5 ‘Figaro Foundation Project: Save the Barako’, http://www.figarocoffee.com/barako.htm6 A collection of blends named after four (4) areas, Makati, Shaw, Manila and Alabang.7 The purpose of the Coffee Board is to develop and promote the Philippine Coffee Industry throughresearch, technical assistance and credit programs for development, expansion, rehabilitation andrejuvenation of coffee farms, millers and roasters, and through marketing and promotions of coffee fordomestic and export markets. The Board is composed of coffee farmers, traders, millers, manufacturers,retailers, exporters, roasters, researchers and experts from the academe and agricultural sector. 133

In the Business of Making Peace:LA FRUTERA AND PAGLAS IN THE PHILIPPINESby Charmaine Nuguid-Anden11. Introduction“Peace and development go together. We cannot keep on waiting for peace to come first. The reason whythere is no peace is that there is no development. Fact is, if there is no livelihood, people can do anything asthere is nothing to lose on their end. Now that we have given the Datu Paglas townsfolk gainful employment,they do not even want to lose even a few days’ wages.” Senen Bacani, Chairman, La Frutera Inc. 2I n the Autonomous Region of Muslim Mindanao, La Frutera Inc. is the investor in a banana plantation located on 1,300 hectares of land owned and represented by the Paglas Corporation. Remarkably, these“twin” companies are a veritable “United Nations of Bananas” in the heart of insurrection-torn and poverty-stricken Maguindanao, on the Philippine island of Mindanao. The collaboration was made possible by apartnership between the Saudi trading company Abdullah Abbar & Ahmed Zainy Co., Israeli farming experts,the Italian De Nadai Family, Chiquita Brands International and members of the separatist army MoroIslamic Liberation Front (MILF). Behind this partnership, the stalwart local leadership of Datu3 Toto Paglaspromoted the development of the surrounding communities and uplifted the self-esteem of MuslimMindanaoans. The story of these two companies cannot be extricated from the violent land which gave itbirth.134

Case Study: La Frutera and Paglas Corporation: In the Business of Making Peace2. In Violence and Carnage…Mindanao was never conquered. As the rest of the Philippine islands were under colonial rule first by theSpaniards and then the Americans, Mindanao was under the nearly unchallenged control of Muslim noblefamilies. The migration of Christians from the North became the matchstick for secessionist guerrillafighting in the 1950s, and various groups emerged such the Moro National Liberation Front (MNLF) andthe MILF claiming that they fight to protect Muslim interests.Known as the Bangsamoro Nation, Muslim families represented by their respective Datus at various pointssupported these secessionists, often resulting in warfare between families vying for leadership in the“Moro nation”. These conflicts were taken advantage of by mercenary groups and kidnap gangs, giving thewhole of Mindanao, and Muslims in particular, a reputation for merciless bloodlust.In 1988 Datu Ibrahim III ‘Toto’ Paglas became mayor of Datu Paglas and became witness to the violencethat resulted in the murders of his brother and eventual death of his father. Breaking traditional retaliatoryaction, the 25 year-old Datu made it very clear that all criminal and terrorist activities would not betolerated. His family ties to the MNLF and MILF led to direct appeals to MILF Chairman Hashim Salamatand by the 1990s Datu Paglas and neighboring areas were on the road to becoming an oasis of peace.3. The Mighty and the Small United…Datu Toto was able to convince the neighboring leaders to form a consortium known as the PaglasCorporation (Pagcorp), and together with his substantial landholdings made available 1,300 hectares. In1994, Datu Toto contacted a foreign investment group, represented in the country by Oribanex whichmanaged several existing plantations in nearby Non-Muslim Davao. The group was apprehensivebecause of the volatile situation in Maguindanao, yet its studies showed that the land was fertile,the water more than adequate and the weather ideal. In late 1997, the foreign investment groupoffered to lease the land for an equivalent of US$ 70 a hectare a year – a trifle compared to the $160being demanded by landowners in other areas of Mindanao. A total of 1,500 hectares was leased andultimately the Oribanex group made an investment of $27 million, making it the largest foreigndirect investment in Muslim Mindanao.The plantation became known as La Frutera Inc., managed by the Ultrex Group (springing from Oribanex)from Manila and the Unifrutti group (Chiquita International). Datu Toto convinced MILF soldiers andsympathizers to work on the land instead of taking up arms, ergo providing the labor. The plantation wasstarted up with Israeli technology and Ultrex brought in management know-how from the ChristianNorth. The rising apprehension that began to emerge from the mixing of new cultures was largely calmedby the charismatic presence of Toto Paglas. 135

Datu Toto Paglas served as mayor for three more terms, and currently runs Pagcorp full time.4 Pagcorphandles labor relations and offers support services to the La Frutera in terms of trucking and security. Arural bank now operates in the area (supported by Paglas) and small commerce now lines the streets ofDatu Paglas and the nearby municipality of Buluan.4. To be a Testament of Progress…La Frutera promoted cultural understanding among all employees, and the start-up Christian management,but the approach used was traditional Muslim. This was essential, because it was discovered that certaintraditional practices were not religious in nature but were unique cultural affectations of MuslimMindanaoans. Ninety percent of employees were hired from local communities, about 2,000 workers andof which over 1,000 are regular employees.Promoting cultural sensitivity became the priority concern during the first years. Workers were still totingguns, mostly out of habit, and the management was challenged to provide policies and practices thatwould bridge not only Muslim and Christian, but also rebel and pacifist, and men and women. Valuestraining and capability building were prioritized, and nearly all of Datu Paglas and Buluan were employedby the company. These “new” values therefore began to filter down to the rest of the community. As moreMuslims moved up the ranks, it showed management commitment that La Frutera would be managedboth by Muslims and Christians.The La Frutera Community Development Foundation was established in 2000 to implement specific socialresponsibility initiatives of LA FRUTERA. This was an offshoot of La Frutera’s efforts to practice sustainabledevelopment through environmental and health management. The Socio-Cultural Section of La Frutera’sHuman Resources Development department is running the Foundation in collaboration with Datu Toto.One of its main projects is the establishment of a training Center providing livelihood prospects to thecommunity. Most projects need to be approved by the Board as presented by the HRD manager; howeversome projects go directly to Datu Toto for his approval. The HRD department supervises values educationand related training activities. Regarding direct community assistance, the La Frutera Foundation prioritizeseducation and livelihood programs. The company also responds to direct requests from the community.All community relations’ officers assume primary responsibility for project co-ordination, but all staffmembers are involved in various projects. The company also responds to requests made by the MindanaoCoordinating Council, which is co-chaired by Datu Toto.136

Case Study: La Frutera and Paglas Corporation: In the Business of Making PeaceThe company is also demonstrating leadership in environmental and quality management. La Fruterais currently undergoing the process of becoming ISO 14001 and 9002 certified. In 2001, the companyobtained its certification from Better Banana Project, a Conservation Agriculture Network program ofthe Rainforest Alliance. This means that La Frutera is committed to principles of: conservation ofnatural ecosystems; wildlife protection; good working conditions; community relations; minimization& maintenance of strict control on the use of ago-chemicals; integrated waste management; andwater and soil conservation, planning & monitoring.Pagcorp also became a member of Philippine Business for Social Progress (PBSP) and acts as showcase forresponsible business in Mindanao. Datu Toto stands as co-chairperson of the Mindanao CoordinatingCouncil, which is the overall body coordinating all activities related to the rehabilitation of Mindanao.Community relations’ activities have included information campaigns on concepts such as 5S Philosophy5and sanitation; preparation of proposals for capability-building and non-formal education; scholarships;and financing for Hajj pilgrimages, etc. The company also conducts research and networking for livelihoodpartnerships with the community. Pagcorp and La Frutera also recently launched information campaignson savings and setting up an emergency savings fund for workers at the local rural bank.5. …In Values and LeadershipAccording to Ed Bullecer, interim General Manager of Pagcorp and current Senior Adviser for UNSpecial Projects, cross-cultural harmony is a priority in Pagcorp and La Frutera. More importantly, aresolute faith that “change is for the better” characterizes management. “Some people still can’tadjust,” says Rose Sira, HRD manager of La Frutera, but management understands Philippine Muslimculture, wherein an underlying sense of inferiority still exists. She remarked that the transformationof the local culture has been dramatic over the past five years. The leadership of Toto Paglas is oneof the key factors in the success of the whole enterprise. But the combined experience of otherbusiness leaders has given the company the background and expertise it needed to become a showcase.For example, La Frutera President Pedro Changco Jr. was formerly one of the landowners of the DolePhilippines plantation.Rose Sira explains that La Frutera is a testament to true volunteerism, wherein even the investors agreedthat business should be an instrument of peace instead of peace being a precursor to business. Ed Bullecerbelieves that Pagcorp embodies the spirit of the Bangsamoro which is essentially not to think of personalgain. Belonging formerly to the Oribanex group, he recalls the investors depiction of the fateful meetingin 1997 as “God’s appointment”. Corporate citizenship is done through paying right taxes, being responsiblefor all actions, advocating for ethical competition and not damaging its reputation in local communities.Ed adds that volunteerism is doing something without being asked. Rose believes that quality managementis another key value that is also imparted to everyone in the company. 137

The Paglas experience has been shared in various fora, and some businessmen are becoming responsiveto the idea. However, many point out that they do not have a Datu Toto to help them. Originally, DatuToto was not responsive to the idea of self-promotion (as promoting the plantation meant promotinghimself and the family) but his business partners convinced him that spreading the success storywould give others hope – and that this could enable the experience to be replicated elsewhere. Thelocal partners acknowledge that countryside development might seem more a political agenda than abusiness one, yet the investors felt it was also the company responsibility. The company believes that“peace and order is everyone’s responsibility”.6. And the People Say…Community representatives indicated that they highly respect La Frutera and support all its activities.However, political color also can be found with some community members expressing concerns aboutdealing with the Paglas Corporation because of Datu Toto. In particular, community people suggested thatPaglas acted as a manpower agency, getting a cut from the salaries of La Frutera workers as part of their“fee”. They also contested that workers could not form unions because of Datu Toto rather than Islamicteaching. Unionism and some other aspects of western worker rights are considered un-Islamic by localIslamic authorities. They indicated that the other communities now offer an alternative for La Fruteraworkers, even though there is only the promise of development and no actual enterprise already in place.Rose rebutted that no additional fees were paid to Pagcorp for sourcing labor.7. That Peace was Good (More or Less)…La Frutera and Paglas benefited from ‘Datuism’6 in the early stages. La Frutera would not exist without thecombined faith of Datu Toto, and various local and foreign investors to develop a productive enterprise inthe face of such adversity. However, as the company moves into its next five years, the investors andbusiness managers realize that apart from social leadership, La Frutera and Pagcorp must also provide anenvironment for business leadership. One of the goals of the La Frutera consortium is to pass on themanagement of the plantation to Pagcorp after 20 years, as Rose admitted that the plantation is under aBuild-Operate-Transfer (BOT) arrangement with Datu Toto.Anecdotes of former MILF leaders moving up the ranks as managers indicate that Muslims have businessacumen if given the opportunity. However, it is also important to note that the current managementacknowledges that most of its business concepts are Western, and as the eyes of the world focus more onIslamic practice, the leadership is aware that the company is an emergent experiment in combined Westernand Islamic management.138

Case Study: La Frutera and Paglas Corporation: In the Business of Making PeaceMeasurement and reporting in corporate social responsibility (CSR) is also becoming a priority concernfor La Frutera. In line with its bid to obtain ISO 14001 and 9002 certification, strict monitoring andreporting is being conducted in all areas. The HRD Manager acts as the Environmental ImpactAssessment Auditor, and the plantation is also under the Philippine Environmental Impact Assessmentlaw. The Paglas/La Frutera banana plantation was the first to be certified in Asia by the RainforestAlliance, a global certifying body that monitors the social and environmental impacts of the bananaindustry.8. So They Took a Hard Look into the Mirror…Benchmarking the company’s social and environmental expectations and accomplishments, Rose Sirasuggested that marketing advantage (brand equity and product patronage) was not applicable to them asthe company had a captured market with its exclusive buyer Chiquita Brands International. She notedthat the company’s approach to social and environmental responsibility had led to gains in governmentincentives, public issue advocacy and in reaching out to untargeted stakeholders. There were no apparentgains or losses in the trust of the community and in obtaining community support, public perceptions ofthe company and its social and environmental profile. Expectations were higher than actual results in anumber of areas: the value chain, decision-making processes, corporate planning and issues management,product design, (local) government support, and replication by other entities. In some areas, there wereminor losses in staff and line functions and employee and external party support.Rose explained that many of these losses are due to the ongoing transition in La Frutera from rule by‘Datuism’ to a western corporate one. Hiring and personnel decisions made by La Frutera are at timesquestioned by staff, especially those that had been personally selected by Datu Toto, or are his relatives.Neighboring communities became eager to develop their own enterprises, but in the process began piratingworkers with “get rich quick schemes”.Local governments, though supportive of La Frutera, are at times politically opposed to the Paglas clan andtherefore are unsupportive of some projects by the current mayor of Datu Paglas (Datu Toto’s brother).These conditions pose unique challenges to La Frutera management and shareholders, who are active inthe affairs of the plantation. Based on these results, Rose insists that the formation of La Frutera is still anact of volunteerism and not just an investment. 139

9. …And Continued to Strive. La Frutera Mission To produce competitive quality bananas atIt is evident that early leadership (as well as the lowest possible cost through motivatedDatuism) has engendered a sense of advocacy in human resources and environment-friendlyeach employee. The company had been successful technology.in promoting business in the area, but it must alsostrive to meet the challenges arising not merely from Visionthe Christian/Muslim management dichotomy, but La Frutera envisions a continuous andrather that of Western/Islamic principles. As far as sustainable growth that will contribute tobusiness strategy is concerned, the foreign employment, livelihood and businessconsortium’s direction towards developing true opportunities thereby promoting employeesMuslim business leadership shows that peacetime and community well-being as well asbusiness can be as challenging as business in times regional peace and prosperity.of conflict. What is more important is that thecompany is addressing the underlying factors that Valuesallowed conflict to fester in the area and it is here Results-focusthat business creativity and problem solving will Countryside Development Orientationbe most useful. The business case for social and Cross-Cultural Consciousnessenvironmental responsibility is very strong in Customer FocusMaguindanao, for the Datu Paglas experience shows Existence of Organizational Pridethat business acting as a leading advocate is the High Regard on Cultural Dimensionsmost effective way of creating peace. Change OrientationReferencesAsian Social Issues Program (2001) The Role of Business in Promoting Peace in Mindanao, July, 18 2001,www.asiasource.org/asip/mindanao2001.cfmManuzon, M.T. (2002) ‘Fruits of Farming’ in Philippine Business Magazine, Volume 9 No. 3, http://www.philippinebusiness.com.ph/archives/magazine/vol9-2002/9-3/cover.htm140

Case Study: La Frutera and Paglas Corporation: In the Business of Making PeaceNotre Dame University (1995) Profile of the Province of Cotabato, Region XII, Philippines, UniversityResearch Center Databank, Cotabato City, Philippines, http://www.ndu.edu.ph/urcdb/region12/ncot.htmlRCSDP (2002) Promoting Peace Through Investments in Mindanao: Paglas Corporation, Good PracticeProfile, London: Resource Centre for the Social Dimensions of Business Practice (RCSDP). http://www.rc-sdbp.org/library/documents/resourcecentre/organisations/initiatives/ doc1152403.docRimando, L. (2003) ‘The Good Earth’ in Newsbreak, Special Issue, January-June 2003, http://www.inq7.net/nwsbrk/2002/dec/23/nbk_14-1.htmSira, R.(1999) La Frutera Employee Manual, La Frutera.Sira, R. (2002) La Frutera HRD Social Action Reports, La Frutera.Solomon, J. (2002) ‘Plantations Bring Peace to Violence-Weary Philippine Region’ in The Salt Lake Tribune,March 24, 2002, http://www.sltrib.com/2002/mar/03242002/business/721848.htmSolomon, J. (2002) ‘In This Philippine Town, Muslims. Jews, Rebels Set Aside Differences for Bananas’, inThe Asian Wall Street Journal, March 21, 2002.Endnotes1 National UNV - BCR Specialist.2 Quoted in Manuzon (2002).3 Datu (or Datuk) is an honorific title for Muslim chieftain or leader. It is commonly used in the Philippines,Malaysia and Indonesia.4 Datu Toto Paglas III was nominated by Jaycees International (Sapporo, Japan) as one the World’s TenOutstanding People in 1999.5 Based on five Japanese words that begin with ‘S’, the 5S Philosophy focuses on effective work placeorganization and standardized work procedures. 5S aims to simplify the work environment, reduce wasteand non-value activity while improving quality efficiency and safety.6 Datuism is a system of traditional government, introduced in Cotabato in the later part of the 15thcentury by Shariff Kabunsuan, a Muslim missionary who later ruled Cotabato and with his descendantsestablished the Sultanate of Mindanao. Under Datuism, the datu (or chief) is deemed to be the “dispenserand lawgiver of death.” This system developed Muslim Mindanao culture and kept Muslims united in theirstruggles against foreigners. See: Notre Dame University (1995). 141

DTI/Nestlé: The “Kapihan sa Quezon” ProgramA PARTNERSHIP TOWARDS COMMUNITY DEVELOPMENTby Charmaine Nuguid-Anden and Joy Sajonas11. IntroductionO n October 30, 1998, an Investment and Marketing Encounter in Gumaca, Quezon province was sponsored by the Department of Trade and Industry (DTI) for the province’s farmers belonging inagrarian reform communities (ARCs).2 Prospective investors and buyers of the farmers’ produce participatedin the Encounter. One of the resource speakers for the said activity was Nestle Philippines’ Assistant Vice-President for Agricultural Services, Mr. David Santos. Mr. Santos impressed upon the farmers that growingcoffee especially the Robusta variety, which is used in instant coffee products, is a profitable endeavourfor them. Given that Nestle is the Philippines’ largest market for the country’s coffee and therefore is anauthority on the nature of the coffee market, the farmers were convinced to give coffee farming in Quezona boost.Thus, on March 12, 1999, a partnership was formed between Nestle Philippines, DTI-Quezon, Departmentof Agrarian Reform (DAR) – Quezon 2 Provincial Office and 12 ARCs. A Marketing Memorandum ofAgreements was signed between DTI, DAR and the ARCs. Nestle committed to support the program byproviding technical assistance to the ARCs. The company also committed to purchase their Robusta coffeeproduce at the market price – although farmers were not obligated to sell solely to Nestle. This was thebeginning of the coffee production and marketing project in Quezon to be later known as the “Kapihan saQuezon” Program (Coffee Farms in Quezon Program – rough translation).2. The ‘Drivers’ of Kapihan sa QuezonKapihan sa Quezon Program is an inter-government agency and government-business program for thefarmers in Quezon. DTI-Quezon, which facilitated the creation of the program, acts as the Secretariat ofthe Program. DAR-Quezon provides extension services and supervises coffee growers in ARCs while Nestleprovides the main thrust of Kapihan – technical and marketing assistance to the farmer-beneficiaries.142

Nestlé/DTI: The “Kapihan sa Quezon” Program A Partnership Towards Community DevelopmentDTI serves as the primary coordinating, promoting and facilitating arm for trade, industry and investmentactivities of the Philippine government. It acts as the catalyst for intensified private sector activity toaccelerate and sustain economic growth. The agency has regional and provincial offices all over thecountry.The enactment of the Comprehensive Agrarian Reform Program (CARP) law in 1988 created a major shiftin the farming practice in the Philippines. The feudalistic relationship between landowners and tillers inthe country was dismantled. The tillers became landowners themselves. Mindful of the difficulties that theAgrarian Reform Beneficiaries (ARBs) would face in the initial stages of running their own farms, theseARBs were organized into communities or the ARCs by the Department of Agrarian Reform (DAR). DAR isthe principal agency responsible for implementing the CARP. Specifically, it is tasked to improve landtenure through better access to land and its fruits. It shall also enhance the welfare and promote thedevelopment of agrarian reform beneficiaries through the coordinated delivery of essential support services.Nestle is the largest food and beverage company in the world. Nestle Philippines holds the same distinctionin the country. The company takes pride in its commitment to environmentally sound business practices asembodied in its policy on environment. It also supports sustainable farming practices that satisfy longterm economic, ecological and social requirements. The company does not engage in commercial farmingactivities. It sources its agricultural raw materials – primarily sugar, vegetable oils and coffee either throughtrade channels or directly from local producers.Nestle is committed to improve the conditions of small coffee farmers and cooperatives and providesagricultural service assistance to those who seek to improve the quality of their produce. In this way,farmers are able to sell their products at market prices and Nestle is able to procure coffee products ofexcellent quality.In Nestle Philippines, the Agricultural Services Department is responsible for extending technical assistanceto coffee farmers. In the recent years, the company has seen a drop in the domestic supply of coffee thatit has been forced to import in increasing quantity from ASEAN countries to augment their supply. Thisprompted Nestle to network with all concerned parties who are involved in coffee development projects. 143

3. Quezon Province and the ARCsQuezon Province constitutes an aggregate land area of 870,600 hectares. Located in the Southern Tagalogregion, the province is subdivided into four districts with topological variances from flat rice plains tomountains. It is home to about 1,482,955 people (year 2000 figures).The province is known for its large coconut farms. Most of the arable lands in the area are planted withcoconut trees with most of the farmers engage only in coconut farming. Copra, which is from coconut,used to be the main industrial product of Quezon but over the years the price of the product is turning torecord lows. This prompted the local government to intervene by turning majority of the affected landsinto ARCs and by encouraging the farmers to engage in planting other products aside from coconut.Coffee farming emerged as one of the viable alternatives to coconut farming.4. The Birth of Kapihan sa QuezonThe signing of the MOA between and among DTI-Quezon, DAR-Quezon II, the 12 ARCs and Nestle was thebeginning of a multi-sectoral partnership aimed at reviving Quezon’s coffee industry, providing alternativelivelihood to farmers in the province and increasing domestic production of high-quality Robusta coffeewhich Nestle and other companies can use for their coffee-based products. A Training of Trainors onCoffee Production was held and by the first quarter of 1999, several farmers have already sowed certifiedcoffee seeds from Nestle.The inroads made in the ARC coffee project did not escape the attention of the provincial government ofQuezon headed by Governor Wilfrido Enverga. The project was adopted as a priority provincial project forthe farmers of Quezon and was dubbed as the “Kapihan sa Quezon” Program. Along with the provincialgovernment, the Quezon Mayors League, Philippine Coconut Authority (PCA), Quezon National AgricultureSchool (QNAS) and the Southern Luzon Polytechnic College (SLPC) took active participation in the projectand were formed into a Task Force to oversee its implementation. An Institutional MOA was signed onAugust 5, 1999 to identify the role of each institution in the program.144

Nestlé/DTI: The “Kapihan sa Quezon” Program A Partnership Towards Community DevelopmentThe Taskforce developed a five-year plan for Kapihan. It targeted a total of 1000 hectares for coffeeplantation. It aims to increase household income on an annual basis; increase employment by creatingtwo direct and four indirect jobs per hectare and produce one kilo of coffee for every tree. DTI estimatesthat about 1.6 tons of coffee seeds will be harvested per hectare (at about 1660 trees planted/ hectare)and with an estimated price of P50/kilo, farmers are expected to earn around P50,000/hectare (P80,000income less expenses of about P30,000/hectare).The Program was also adopted in 1999 by DTI as a component of its DRIVE program. DRIVE or the DevelopingRural Industries and Village Enterprises is a “national program with a countryside centered, market drivenand agri-industrial approach where government deems the private sector as partners in developing thedomestic, industrial base and opening up of opportunities for small and medium enterprises (SMEs) in theprovince”. DRIVE, which began in 1998, is implemented by DTI and was a priority project of the Office ofthe President at that time.Kapihan became a component of DRIVE because of the Big Brother approach that is used in itsimplementation – with Nestle providing the farmers of Quezon with technical assistance, market assuranceand human resource development. This is in accordance with the concept of DRIVE where big businessesare encouraged to assist small community enterprises in their areas of competence.5. The Business of Growing CoffeeThe Kapihan program components include training; seedling production and nursery management; seedprocurement and technical assistance to farmers. Nestle assists the farmers through on-site training oncoffee nursery management, plantation establishment and on the post harvest process. It also conductstraining for local agriculturists and DAR personnel who assist the Nestle agronomist in the supervision ofcoffee farmers. Nestle also sends sons and daughters of farmers to Davao (Mindanao) to visit model coffeefarms under the company’s Future Farmers Program – a program which aims to provide second-generationfarmers with the technical assistance they need to equip and prepare them to become good farmers whenthey take over their parents’ farms. DTI-Quezon, aside from acting as Secretariat, also extends technicalassistance during trainings for farmers whenever the Nestle agronomist, who is assigned to many provinces,is unavailable.In the initial stages of the program, seeds were distributed to farmers for plantation development. However,the experiences of the farmers from the different localities showed that there is wide variation in thesuccess rate for such strategy. Seedling starters have a higher success rate than seed starters. Also, farmersprefer to receive seedlings rather than seeds so they won’t have to germinate the seeds themselves. Thislessens their waiting time before harvest and allows them to plant other crops instead of tending the 145

coffee seeds during the germination period. This prompted the program implementers to establish a seedlingnursery in the province’s agricultural school (QNAS). Twenty second-generation farmers were sent to theNestle Future Farmers Program Center in Davao for training. The participants then used the knowledgethey got from the training to establish the nursery as well as to develop their own farms.The establishment of the coffee nursery proved to be successful. The farmers saw their seedlings bloominto coffee trees. QNAS has also become the centre where new local farmers can go and study nurserydevelopment and the techniques of coffee farming. At present, nursery and plantation development effortsare underway in each of the four districts of Quezon – replicating the QNAS experience in their ownlocalities. Nestle and DTI continue to provide inputs and monitors these nurseries.As of 2002, 28 municipalities of Quezon – about seven from each of the province’s district – are involvedin Kapihan. Thirty-five farmer’s organization and 11 LGUs support and are active participants of the program.There were 52 trainings conducted by DTI and Nestle for about 1100 farmer-beneficiaries. The group alsotrained 67 technicians. About 500 hectares of land is planted with coffee and is being tended by around190 farmers. A clonal nursery and a clonal garden are being maintained with over 500,000 seedlingsplanted. Mr. Menardo Noscal, DTI Trade and Industry Development Specialist assigned in the program, isconfident that by 2003 they would be able to achieve if not surpass the target the Kapihan Taskforce set. Box 1. Clarito Rizarre is an ARB and an active member of the Katuparan Agrarian Reform and Multi-Purpose Cooperative in Catanauan, Quezon. He started his coffee-farming venture on April 1999 by sowing a quarter of a kilo of Nestle certified seeds. In November 2001, he had a bountiful harvest from the 800 healthy coffee trees that grew out of the seeds he sowed. This was made possible with the assistance of Dr. Jose Reano of Nestlé and DAR Development Facilitator Ador Gojar who provided technical know-how and supervised the rehabilitation efforts of the farm when strong winds wrought havoc to the coffee trees.146

Nestlé/DTI: The “Kapihan sa Quezon” Program A Partnership Towards Community Development6. Partnership in ActionDTI, DAR and Nestle consider themselves as a “team united with one vision”. Constant communicationallows them to explore innovative solutions to the myriad of concerns that they face in the implementationof the Kapihan program. The support of the local government of Quezon allows them to tap local resourcesin ensuring the program’s success. The process of engaging the farmers is done through Box 2. Grajeda Farms, owned by Mr. Cesar participatory mechanisms. Barangay (village) Grajeda, is used by Nestle and DTI as a workshop consultations were employed. Through showcase of the transformative power of a these workshops, the program implementers legitimate community enterprise. He was presented the program and its components to the convinced to engage in coffee farming. farmers. These consultations provided the Now, he not only plants coffee but also implementers a gauge on how the farmers view the papaya and black pepper through multi- program and with feedback on how they could make cropping. He employs 2 people to help him Kapihan relevant to their present economic and run his farm. He is thankful for the social conditions. DTI, DAR and Nestle also conducted opportunity to engage in a profitable and, focus group discussions and orientations, in more importantly, legitimate business. cooperation with the LGUs in this regard. Lectures on government policies and market viability of coffee and other farm produce, among others,are regularly conducted by Nestle and DTI. Nestle informs the farmers of the coffee buying station thatthey set up to facilitate the selling of their produce – acting as marketing anchor for farmers. The companyalso pledged to buy all the coffee that the farmers would harvest but at the same time it impresses uponthem that they are not prohibited from selling to other coffee buyers. Farmers are not bonded to sell toNestle alone. This is made clear in the lectures to farmers. By providing technical assistance to coffeefarmers, Nestle seeks to create a stable supply of coffee from the Philippines and providing a source oflivelihood to farmers and not have a monopoly of Quezon’s coffee produce.Nestle agronomist for South Luzon, Dr. Jose F. Reano, who also heads the research and development forthe company’s Agricultural Services Department, notes how Nestle has become more aware of Quezon asa viable supplier of coffee. Dr. Reano is providing leading edge farming practices to the farmers by introducingnew and innovative environment-friendly and economically viable technologies. Through the adoption ofthese technologies, Dr. Reano is confident that the farmers will have a bountiful harvest of high qualitycoffee seeds while maintaining the soil’s productivity. He considers this coffee-based farming systemapproach a good strategy in raising the farmers’ awareness on environment protection, particularly on thedangers of soil degradation. 147

Monitoring of the progress of the coffee farmers is done monthly by the program implementers. Monitoringforms and farm visits are used to determine the farmers’ progress. DAR used to implement a monitoringform, which after some trials was found to be too cumbersome for the farmers, and was therefore simplifiedfor easier use.The commitment of the government agencies, LGUs and Nestle in the Kapihan program is not lost on thefarmers. They recognize that the time and effort being put into the program by the local agriculturists,Nestle agronomists and the staff of DTI and DAR, who they sometimes find overzealous, is driven by thegenuine desire to improve their lives.Mr. Samuel Hernandez, a Senior Agrarian Reform Officer and one of DAR’s staff in the program notes thatwith the Kapihan sa Quezon, they are confident that coffee would be one of the high value crops in theprovince. Even at present they are already seeing the fruits of the program with the hiring of laborers andfarmers to help in the farms especially the big ones. Those who have engaged in multicropping have seentheir incomes increased with the harvest of their cash crops and coffee seeds. Given these gains, Mr.Hernandez expects more farmers to participate in the program and more idle lands to become productiveagain through coffee production. Given the accomplishments already made, they believe that the end goalof making Quezon a major producer of coffee beans is achievable in the next few years.7. Lessons and ChallengesThe implementation of the Kapihan Program was not without its share of problems. Foremost of thisis changing the attitudes of farmers who are used to being agricultural workers or plantation labourersand were thus wage earners. Before the CARP, for many years, these farmers were earning evenwithout actually tilling a land. When they started farming their own lands, they got used to plantingcoconut and prefer to plant it than other crops because it requires less effort and time. When theprices of coconut products was high, farmers got a good return from their coconuts but when theseprices started falling and its economic viability was threatened, farmers continue to rely on coconutas their main source of income. Despite the encouragement of the local government and the supportservices available to enable them to venture into farming other products, including coffee, most ofthe farmers continue to rely mainly on coconut farming.DTI, DAR and Nestle often encounter farmers who are resistant to coffee farming during their trainings.Mr. Alejandro C. Cruz, Provincial Agrarian Reform Officer II, admits that coffee is a difficult crop to producecompared to coconut given the amount of care it needs to grow and the length of time it takes beforeharvest.148

Nestlé/DTI: The “Kapihan sa Quezon” Program A Partnership Towards Community DevelopmentThus, it is not easy to convince them to shift to planting coffee. He and the other program staffconcede that only through continuing education and consistent motivation will they be able to makefarmers realize that planting coffee is more profitable than coconut farming. And although it mayrequire more effort that what they are used to, the economic gain would be more than worth thateffort. While recognizing that re-education of farmers is a long process, they remain optimistic thatwhen farmers see the improvement in the lives of those who have ventured into coffee-farming, theywould have a change of heart and would be willing to try it also for themselves.The problems faced by the Kapihan implementers in encouraging more farmers to plant coffee have ledthem to re-evaluate their strategy. They eventually decided to adopt an integrated farming scheme thatallows for multi-cropping – farmers are provided with seedlings and technical inputs to enable them toplant cash crops such as arrow root, peanut, papaya, pepper and other fruits and vegetables and earnincome while waiting for their coffee harvest. This has been met with enthusiasm by a number of farmers.The primary example of the success of multicropping in Catanauan, Quezon is the Timbreza Coffee Farm,owned and operated by Mr. and Mrs. Mario Timbreza. Their coffee farm is intercropped with pineapple,corn, yam, peanuts and eggplants. Mr. Timbreza’s coffee trees are growing very well and a good harvest isexpected. But before then, he is enjoying the income coming from the cash crops also planted in his farm– a glaring example of the benefit of integrated farming.DTI and Nestle recognize that there is the danger of these farmers engaged in multicropping abandoningcoffee farming for cash crops farming. Given the significant lesser amount of time and effort needed toharvest these crops compared to coffee, farmers are easily tempted to forget about coffee farming altogether.They concede that this is an inherent risk in their approach. They continue to promote alternative livelihoodto farmers, including food processing, but they also make them realize the value of coffee-based farmingsystem approach. They are hopeful that the success of the likes of Mr. Grajeda and Mr. Timbreza willencourage the other farmers to adopt this approach in their farms.Another model for success that DTI and Nestle uses in enticing farmers to engage in coffee farming are theexperiences of successful pilot private farms that joined the Kapihan. Although the Program started outwith only land reform communities as beneficiaries, there have been landed farmers who participated inthe program. These farmers have been very receptive to the goals of Kapihan and have committed theirlands to coffee production. Nestle believes that the success of these private farms would serve as inspirationto the ARCs who may be interested in planting coffee themselves. 149

Box 3. When Engr. Ricardo Lusterio decided to develop his four-hectare land into a coffee farm in 2000, DTI and Nestle were there to lend a hand in the realization of his desire. Over 6000 coffee seedlings were transplanted to Engr. Lusterio’s farm in August and September of that year, including cloned seedlings from QNAS. Soon, Lusterio Farm will be the source of the first certified clonal coffee seeds – a source of pride not only for Engr. Lusterio but also for the entire people of Quezon.The inter-agency approach in the implementation of the Kapihan and the pooling of the resources of eachcontributed to its wider reach – with almost all municipalities of Quezon having farmer-beneficiaries. Theadoption by the provincial government of the Kapihan program as a priority project gave DTI, DAR andNestle political legitimacy in the eyes of the farmers who may be have been initially sceptical of theprogram.The problem of peace and order especially with the presence of guerrilla rebels in Quezon is another areaof support Kapihan needs from the local governments. The revolutionary tax required by NPA rebels fromlandowners is one of the strongest disincentive to the development of a significant area of idle lands in theprovince. Landowners would rather leave their farms unproductive rather than give in to the demands ofthe rebels and always live in fear. Vast tracts of land, which could be used as coffee plantation or for othercrops, are left unattended and wasted because of this. The LGUs’ capability to address this issue is crucialto gaining the participation of landed farmers to Kapihan.Getting the continued support of the political leadership is also a challenge to Kapihan’s implementers.Change in leadership often times means a change in priorities. The new leader may not consider theprogram a priority and would want to focus the local government’s resources to other programs. Sometimes,it may be because the program is identified with the former local chief executive that the new leaderwould not want to have anything to do with it. Instead, he or she would want to create a program thatwould be identified with his/her leadership. These situations pose the question of continuity and stabilityof a program like Kapihan.What DTI and the other agencies of Kapihan do in these situations is to inform the new leader of theprogram and its benefits. Although this is a taxing endeavour as it means they would have to go back tosquare one with the LGU, the Kapihan implementers see it as a worthwhile task given the benefits of asupportive local government. The local government’s political and economic resources are necessary andeffective contribution to the cause of Kapihan.150

Nestlé/DTI: The “Kapihan sa Quezon” Program A Partnership Towards Community Development8. ConclusionThe story of the Kapihan program is a story of partnership. DTI in cooperation with DAR facilitated theInvestment and Marketing Encounter that started the coffee production program for the farmers of Quezonwith Nestle providing the business counterpart. The provincial and municipal governments played a crucialrole in mobilizing community buy-in of the program despite the (incorrect) perception of some partiesthat government programs are “all promises”. The cooperation forged with Nestle created a partnershipthat allowed each organization to tap into their core strengths and ensure the program’s viability andsustainability. This partnership is clearly seen with the local governments assessing the needs of thecommunity; the government agencies articulating these needs and Nestle providing the market impetusfor the program. The ARCs also did their share by helping the program implementers craft a responsiveprogram by sharing their opinion and feedback on the program.Nestle’s approach of working with government agencies and LGUs, especially in its coffee developmentprojects, enabled it to ride on the capabilities of local governments to convene and spur communityaction. This opportunity allowed the company to replicate their strategies quickly, without disregardingunique local conditions, and do comparative assessment of results.The ability of the institutions in Kapihan to quickly learn from their experience as they implement theprogram has allowed them to remain relevant, despite some setbacks. This is clearly shown in their decisionto change their strategy from monocropping (coffee plantation alone) to an integrated farming approachto allow the farmers to plant cash crops while waiting for their coffee harvest. Also, even with the changein national and local leadership and with the staff assigned in the program for DTI, DAR and Nestle, theprogram has mechanisms in place to ensure its sustainability. More than the commitment of the staffassigned in the program, it is the commitment of the institutions to see the program through that makesthe difference.Given that the production of coffee in the province started from scratch, the gains of Kapihan may beinterpreted as modest yet impressive. Aside from the economic gains of employment generation andincreased income, the opportunities provided by the program has become a deterrent to criminal activitieslike illegal logging – an unexpected yet welcomed result. The program also strengthened social capital inthe communities of Quezon through the Kapihan-facilitated interaction among the ARBs and betweenthe ARBs and the government agencies involved (including the local governments). The farmers wereprovided with the opportunity to share and learn from each other’s experiences, which paved the way forstronger community relations. The constant interaction of the staff involved with the farmers created aharmonious relationship that facilitates the smooth implementation of the program. 151

Kapihan sa Quezon Program is slowly making headway in making Quezon one of the top producers ofcoffee seeds, in creating a stable supply of local coffee and in changing the farming culture in the province.Despite the challenges that the program implementers continue to face, they are resolute in theircommitment to bring to fruition what they started for the farmers. They remain hopeful that in due time,they would be harvesting more than coffee but also a renewed farming community.Endnotes1 National UNV - BCR Specialist and Lead Writer, respectively.2 An Agrarian Reform Community or ARC is a cluster of barangays where land distribution is almostcomplete and where there is a convergence of services from the national government, local governmentsand non-government agencies implementing the government’s agrarian reform program. These servicesprovide the agrarian reform beneficiaries with knowledge, skills, technical, infrastructure and other supportservices necessary to ensure that these new landowners will be able to make their land productive resultingin an improved livelihood.152

Case Study: Organized Advocacy for Corporate Citizenship: The PBSP StoryOrganized Advocacy for Corporate Citizenship:THE PBSP STORYby Angelito Nayan1 and Charmaine Nuguid-Anden21. IntroductionO n December 16, 1970, 50 leaders of top Filipino and Philippine-based multinational corporations founded the Philippine Business for Social Progress after having signed a joint Statement ofCommitment that officially established it. This “Divine Conspiracy” modelled itself after the DividendoVoluntario Para la Comunidad,3 a Venezuelan development foundation organized by Venezuelan industrialists.PBSP was founded as a direct response to the growing poverty and economic decline as well as theideological challenge posed by communism to the capitalist system in 1970. Armed with the mission of“helping poor Filipinos, help themselves”, PBSP has catalyzed the business sector’s commitment to socialdevelopment.Built on the concept of self-taxation for social development, PBSP gets its funds mainly from its members’contributions of one percent of net income before tax (NIBT). Of this, 20% would go to PBSP, and 80%would be retained to the member companies for their own development initiatives.Today, PBSP is the largest corporate-led non-profit social development Foundation in the Philippines.From its initial handful of corporate members, PBSP’s membership now has swelled to more than 170,mainly coming from multinational and small to medium-sized companies.As a corporate-led organization, PBSP commits itself towards making strategic contributions to improvethe quality of life of the Filipino poor by encouraging business sector to support social development. Inpursuit of this vision, PBSP adopts the strategy of harnessing both the human and natural resources whilealso developing broad-based partnerships and building a corps of dedicated and competent socialdevelopment practitioners in the process. 153

With this, PBSP, now thirty-three years in existence, went beyond being just a vehicle for its corporatemembers in delivering organized, professional and sustainable development assistance to underprivilegedsectors – the landless farmers, fisher folks, rural workers, urban poor, and indigenous cultural communities.PBSP has been able to carve a niche for itself as “one of the world leaders in Corporate Citizenship” ascited by the London-based Prince of Wales International Business Leaders Forum (IBLF) in 1996.The case study, which forms part of the Enhancing Business-Community Relations (EBCR) project of theNew Academy of Business (NAB) and the United Nations Volunteers (UNV), focuses on the context ofcorporate citizenship in a developing country setting.2. Blazing the Trail of Corporate CitizenshipLong before corporate citizenship (CC) and corporate social responsibility (CSR) became buzzwords, PBSP’sfounding members had already used the concept and philosophy in response to the social, political andeconomic chaos at that time. Starting from a ‘dole-out’ welfare strategy, PBSP’s definition and practice ofcorporate citizenship now embrace a developmental and sustainable framework.This paradigm shift did not occur overnight. PBSP went through a difficult learning process of trial anderror due to the absence of a working model that would have guided organizational development. Theneed to respond to emerging societal issues has always been its motivating factor and driving force toexplore and discover new, responsive and sustainable solutions and approaches to key social issues andconcerns. This continuous search for more meaningful expressions of social commitment blazed the trailtowards the emergence of the present-day culture of corporate citizenship among the member companiesof PBSP.In its early years of operation, PBSP involved itself in implementing prototype projects, e.g., Sambahayan(Livelihood Assistance) and the Cooperatives Self-Employment Assistance Program (COOP-SEAP). Fromtheir experience on these projects, a broader concept of community development started to evolve. Withthis, PBSP shifted to an integrated area development strategy using the models of integrated communitydevelopment, local resource management and area resource management. Adopting these models,community relations became a special concern of the organization. Member companies were encouragedto form their own separate corporate responses to social development alongside their core business concerns.Thus, from mere “funding entities” of development programs, member companies soon started to regardthemselves as stakeholders in the communities where they operate their own businesses.154

Case Study: Organized Advocacy for Corporate Citizenship: The PBSP StoryThis strategy allowed the development of tripartite partnership in community development – with businessas the partner of government, NGOs and the public in bringing about social change. It has also earned forPBSP the recognition of being a de facto partner of the government.4 Such accolade given to PBSP madeitself a stable and reliable partner in the development programs of foreign donors investing in the country.This allowed PBSP to engage in bigger programs and projects as its funds no longer depended on membershipcontributions alone but also from their international funding partners. PBSP was also able to widen itsreach and deepen the involvement of its members in social development and in national policy-making aswell. This led its membership to the realisation and adoption of the philosophy that corporate citizenshipis no longer just an option but a business imperative.Such realities then rationalised the need for member companies to take proactive participation in PBSP’scorporate citizenship programs, and for them to integrate the practice in their own respective businessoperations. PBSP responded by improving its corporate citizenship advocacy with the establishment of theCentre for Corporate Citizenship (CCC) in 1992.PBSP charts its major development agenda every five years in line with local laws for non-profits. This hasbeen formalised into a five-year learning curve for development projects for both business members andstaff. CCC was established during the 5th Five-Year development phase.Table 1: PBSP Strategies and Models PERIOD MAIN STRATEGY MAJOR MODELS 1971-75 Prototype Developer Integrated Community Development 1976-80 Small Projects Funder (many project Proponent (civil society)-led areas) 1981-85 Projects rationalized in four project areas Local Resource Management (LRM) 1986-90 Program further focused by poverty Provincial Development Strategy group and geography 1991-95 Programs rationalized with area resource Area Resource Management (ARM) management (CCC was established in 1992) 1996-2000 Programs rationalized by area resource Membership Involvement and Area management and global concerns Resource Management in High Growth Areas (HGA-ARM) 2001-05 Leadership in Corporate Social Comprehensive Membership & non- Responsibility (CSR) Membership Involvement, Regional responses and HGA-ARMSource: PBSP as a Learning Organization: Building Blocks Approach to Development, 2001 155

3. The Center for Corporate CitizenshipCCC was established to provide a forum to discuss and address the need to sustain the gains and furtherimprove CSR practice in the Philippines. PBSP was convinced that the Centre would provide the expertiseand focus required to respond to this need. This became a considerable challenge given that PBSP wasfaced with the need to define what the most strategic interventions are for the business-community as awhole.For a while, the operation of CCC was treated merely as a project. Primarily, the task of the Centrewas to identify the focus areas of PBSP’s CSR initiatives and come up with proposed interventions forthese areas. Assisting CCC in this task were the Consensus Groups specifically formed for this purpose.The focus areas were later identified as education, local government, environment, and countrysidedevelopment. Through this process, CCC was able to conduct pioneering, high-profile activities suchas the Corporate Giving Survey and the Conferences on Corporate Citizenship in 1993 and 1995,which also served as venues for the marketing of corporate citizenship to the wider business-community.However, from 1995 to 1997, the Centre went through a period of reassessment, the result of which wasthe re-shifting in the Centre’s direction and organisational expression. At that time, PBSP went into aphase of “reinventing” itself and part of that process was to start advocating for more strategic forms ofCSR, which is not just about giving, or philanthropy. To add value to the membership, PBSP looked intohow it can start to develop strategic CSR technologies that will help companies improve their internalprocesses and practices.Since then, CCC has become PBSP’s venue for expanding CEO involvement for its membership as well fornon-member companies to participate in PBSP’s CSR programs. As a programmatic manifestation of theadvocacy to make corporate citizenship “fashionable”, the Centre has been able to get wider businesssupport for innovations in corporate citizenship, from policies to programs.From 1997 to 1999, PBSP sought several avenues to translate the vision of “promoting business sector’scommitment to social development”. CCC evolved freely throughout this period, with the view of developingvalue-added services to the Foundation’s membership through program development and constituencybuilding. It became apparent that apart from research on what can be done with businesses, the developmentof corporate-citizenship models was significant towards attaining new commitments from non-membercompanies.In 1999, CCC was reconstituted and finally became a full-fledged Unit within PBSP. The Centre was taskedto be PBSP’s Research and Product Development arm for CSR, thus, making it as a developer and tester ofinnovative CSR technologies. Currently, CCC is organisationally located under the Executive Office but is156

Case Study: Organized Advocacy for Corporate Citizenship: The PBSP Storybeing supervised by the Associate Director of the Operations Group. This arrangement was designed toensure that successfully piloted programs of CCC would be effectively ‘rolled out’ or mainstreamed withinthe Operations Group.The new mandate given to the Centre came at a time when PBSP vowed to develop itself as the leader inCSR. All these defined what CCC is today.4. The CCC Today: Its Vision, Mandate, and Core WorkCCC today anchors its operation in the vision of “establishing a business-community that is fully andactively committed to making strategic contributions to the development of society, sustainability of theenvironment and the improvement of the quality of life of the Filipino poor”.5 As such, the Centre is thusmandated to test, evaluate, document and promote leading-edge practices on Corporate Citizenship.6Reflecting on this mandate, CCC’s objectives7 were defined as follows: a.) Advocate and enrich the discourse to promote the practice of Corporate Citizenship as it relates to the development of society, sustainability of the environment and poverty alleviation; b.) Test leading edge practices on Corporate Citizenship by designing, testing, evaluating and documenting new approaches; and c.) Disseminate and share tested leading-edge practices on Corporate Citizenship through resource data bank, publications (cases, training materials, resource books, newsletters, web pages and other forms of electronic communications), interactive modes (training activities, forums, dialogues and conferences).To achieve these objectives, CCC assumes the following functions: a.) Advocacy: Proactively identify and study emerging issues confronting business, society and the environment through research information and education. b.) Program Development: Conceptualize, implement and manage pilot programs that would develop tools, training or consulting packages that companies can avail of or undertake to improve their Corporate Citizenship practices. c.) Dissemination: Document the development process of its products and services to facilitate transfer and dissemination of program learning and leading-edge practices to PBSP servicing units and member companies or service providers that can reach out to the wider community. d.) Resource Mobilization: Build and strengthen partnerships with funding agencies and resource providers to ensure support in financial terms or expertise for CCC’s functions. 157

These four (4) major functions evolve from a corporate citizenship issue. Appropriate responses to the CCissue is developed through five (5) phases that revolve in a continuous loop: Research; Distillation; ProgramDevelopment and Piloting; Evaluation and Documentation; and Dissemination. 1. Research – CCC’s research agenda focuses on identifying and studying emerging issues affecting business and society. CCC also identifies proactively the needs of the business-community to keep up with public and/or stakeholder expectations. 2. Distillation – This phase involves the conduct of interactive sessions (e.g., Stakeholders’ Dialogue, Business Forum, Roundtable Discussion, CSR Orientation-Forum, etc.) with internal and external groups on CSR issues and concerns. The objectives of this phase are: to get additional inputs on a CSR issue, identify and/or validate courses of action and gain broad understanding and/or support of a particular CSR option or position. 3. Program Development and Piloting – In developing model programs, CCC employs the management systems approach to ensure the institutionalisation of programs and projects with the following aspects: Policy Development, Strategic Program Development and Implementation, and Systems Development. 4. Evaluation and Documentation – Pilot programs are measured in many aspects, particularly with regards to ease of replication and appeal to target adapting companies. Documentation comes in the form of process reviews, implementation manuals and case studies to provide the business-community with relevant tools to start a program or improve their way of practising CSR. 5. Dissemination – This is a major component of every program developed by CCC. To ensure that this phase is observed effectively, every program is designed from the start with clear and well- defined outputs or end products for which clear dissemination strategies are identified.158

Case Study: Organized Advocacy for Corporate Citizenship: The PBSP Story Figure 1: Program Development Framework85. The CC ThemesCorporate Citizenship is a business principle or strategy that can be manifested in many different ways. Ittakes on many forms but has consistent and recurring themes. In its long years of CSR practice, PBSPrealised that the common expressions of CC are in the following focus areas: social investment, corporate-community partnership, environmental stewardship and managing workplace concerns. 159

Table 2: The Four Thematic Areas and the Corporate Citizenship Framework Social Investment Companies make strategic contributions to support programs directly addressing social issues such as education, health and housing. Through this, the business sector gets to expand its traditional role by helping government in community development Corporate-Community Companies re-define their relationship with communities from donor- Partnerships donee, to partners in local development and business. Engaging communities and other stakeholders in mainstream business operations is a concrete manifestation of the company’s commitment to create value to society. Managing Workplace Management provides an enabling working environment characterized Concerns by programs on health and safety, compensation, rewards and working hours, family welfare, disciplinary practices, equal opportunity and others. The logic is clear: employees who are more secure and fairly compensated tend to be more productive and supportive of the company. Environmental Companies take responsibility and assume accountability for any Stewardship adverse impact their operations have on the environment. These efforts have been driven by the demand of communities for better living environment, and by the awareness that a sustainable environment allows more cost-efficient business operations.Some of the Center’s leading edge CC programs per thematic areas are as follows: • Benchmarking Corporate Citizenship Program (under General CC Practice) – This is a four- year program which developed the following: (a) a program management systems framework that guides and enables companies to design effective CC programs; (b) a set of indicators that helps CC practitioners measure the impact of CC initiatives to the company, the communities and other stakeholders of companies; (c) Benchmarking tools to help companies improve their ways of doing things based on the standards set by CC practitioners. The program has produced the 1st Benchmarking CC Practice Report (July 2003) which, along with the Benchmarking self-assessment tools, enabled participating companies to track their competitiveness or leadership positioning in CSR as well as established performance indicators and goals in pursuing strategic corporate citizenship programs. • Business and Peace Program – The program works toward enhancing the capacity of the local companies to adopt and implement internal management policies that promote peace, cultural diversity, and unity in the workplace as CSR initiatives. Furthermore, the program aims to strengthen the competitiveness of business management practices of Muslim SMEs through technology transfer160

Case Study: Organized Advocacy for Corporate Citizenship: The PBSP Story by way of mentoring and internship initiatives. At least two (2) of the program components demonstrate the overarching theme of the program: “Creating Peace Dividends through Corporate Citizenship”: • Young Muslim Professionals for Business and Peace or “YuPPeace” (under Social Investment) – This internship engagement program component provides an opportunity to young Muslim professionals, currently employed in local business enterprises, gain work experience in Mindanao and Manila-based companies. • Business Links Initiative (under Corporate-Community Partnership) – This component aims to facilitate community enterprise development by way of encouraging companies to invest in business partnerships with local communities in such business functions as procurement of raw materials, hiring, sub-contracting and outsourcing of services and the marketing and distribution of products and services.• Greening the Supply Chain Project (under Environmental Stewardship) – The project aims to enable companies institutionalise policies and mechanisms to address environmental concerns through supply chain environmental management given the following components: capability building, mentoring, learning exchange, and tools development.• HIV/AIDS in the Workplace Program (under Managing Workplace Concerns) – The program assists the business-community respond to HIV/AIDS as a workplace concern. It enables companies to design, implement, and sustain HIV/AIDS workplace programs.• Business and Society Learning Program (under General CC Practice) – CCC has prioritised the development of learning courses on Corporate Citizenship themes and expressions in response to the CC needs expressed by PBSP Member Companies and CSR Partners. Some of the learning courses being offered are: Employee Volunteering, HIV/AIDS Peer Education and Counselling, and Greening the Supply Chain.• Corporate Citizenship Learning Resource Center – CCC also manages a Resource Center for the PBSP’s internal and external publics. Beyond its role as repository of CC knowledge and reference materials, the Resource Center takes on a crucial role of not only identifying relevant issues and concerns confronting business and society, but also developing strategies as well as tools that will catalyse CC/CSR discourse and in the process, influence a “new way” of thinking among business leaders and social development managers with respect to strategic links between business sustainability and social responsibility. 161

In a recent survey9 conducted using the Benchmarking Corporate Citizenship System and Process AssessmentTool, the results showed that 78% of companies are engaged in social investment, making it the mostpopular area of corporate citizenship involvement; 76% of company respondents are involved in corporate-community partnership programs; 59% are in environmental stewardship; and, 50% pursue the managementof workplace concerns. Likewise, survey results revealed that 16% of company respondents express theircorporate social responsibility in other initiatives.The survey was conducted among a total of 48 member companies belonging to small and medium enterprise(15%), large industries (80%) and the non-business sector (5%).6. Corporate Citizenship System and Process Management FrameworkCC programs are guided by a Corporate Citizenship System and Process Management Framework (Figure2). This Framework was designed to help companies develop, implement and sustain an effective andstrategic CC program based on five essential elements namely, leadership, policy setting, programdevelopment, systems installation, and measurement and reporting. Each element is defined by a specificset of indicators that guide companies to develop programs that bring short and long-term value to thecompany and the society. Figure 2. The CC Framework162

Case Study: Organized Advocacy for Corporate Citizenship: The PBSP StoryThe five (5) CC elements of an effective and strategic CSR program are defined as follows: • Leadership: Business leaders play a central role in championing corporate citizenship by behaving in ways that are consistent with the company’s principles, values and purposes, and are responsive to the expectations of its various stakeholders. • Policy: Written policy statements are necessary to define a company’s behaviour and guide the internal stakeholders’ decision-making process for the practice of corporate citizenship. • Program: Stakeholder expectations drive companies to respond to local and global issues that may not necessarily be part of their core business. Identifying and developing programs or activities with the community is a concrete manifestation of a company’s commitment to contribute to social, economic, and environmental concerns of a given community. • Systems: Once corporate citizenship becomes an integral part of business operations, appropriate management systems and procedures should be put in place to equip the organisation with the infrastructure that supports the way people integrate and carry out the CC agenda of the company. • Measurement and Reporting: Companies are increasingly challenged by investors, NGOs and communities to tell them exactly what the companies are doing and to support their claims of success with clear and verifiable measures.The Corporate Citizenship Framework and Elements help rationalise business decision to invest in CC/CSRprograms and initiatives. Leadership plays a central role in this decision, as increasingly the challenge is tocreate a corporate culture not only for long-term shareholder value but also for company stakeholders andconsumers who put premium on socially responsible practices.7. Leadership in Corporate Social ResponsibilityIt is apparent that being a Member Company means more than just writing checks – it means activeinvolvement in the work of PBSP. The governance structure of PBSP continues to operate as it has from theoutset: a working Board of Trustees (BOT) made up of CEOs of its member companies. Some of the originalfounding Board Members still serve on a voluntary basis upon retirement from their companies. PBSPTrustees serve through the various committees, namely: the Executive Committee, Regional Committees(Luzon, Visayas, Mindanao) and their respective sub-committees, Small and Medium Enterprise Credit(SMEC), Resource Mobilisation, Corporate Citizenship, Area Resource Management (ARM), Membershipand External Relations, Program Audit, Human Resource Development (HRD) and Information Technology. 163

Several of PBSP’s former Board Members now serve as Department Secretaries or Presidential Advisers ofPresident Gloria Macapagal-Arroyo. Another retired CEO from a PBSP leadership member company is nowthe UNAIDS Goodwill Ambassador for the Philippines. Specifically, CCC receives its guidance and programdirection from the CCC Committee composed of select CEOs of Member Companies.A learning culture was also engendered within PBSP as these CEOs were first to admit that as problemsolvers in business, they had no easy answers for social development problems – they had “to learn bydoing.”Incorporating the expertise of professional social workers with the systemic and results-oriented approachof business was a challenging strategy that had been employed throughout the Foundation’s existence.This distinct success and prestige PBSP has reached in social development work and corporate citizenshiptoday can be attributed largely to the following factors: a.) Distinctively, PBSP has been privileged to have a working Board of Trustees whose members are themselves prominent business leaders who take the time to have a highly active and hands-on involvement in organisational policy-making and operation. b.) PBSP’s adoption and successful mastery of integrating sound business and social development principles in the organisation’s strategic and program planning, consultation, monitoring, assessment, and financial management brought together the best of these two core principles. c.) Having a “learning culture”, PBSP undergoes continuous and regular review and improvement of its strategies and approaches based on the lessons from the past and future trends. d.) Existence of an effective and efficient staff development program that seeks to develop the expertise, commitment and professionalism among the staff. Likewise, the managerial and networking skills of PBSP’s managers enabled the organisation to have access to and dialogue with an extremely wide range of stakeholders – from the poorest of the poor to the most prominent politicians and businessmen in the country. e.) PBSP’s practice of the principles of “division of labour” and purposeful partnership enabled it to expand the range of its functions and activities and form a multitude of diverse partnerships to fulfil its mission. PBSP has a select pool of CSR Champions – a 21-member Board of Trustees as well as regional and program advisory committees, complemented by Business Consensus Groups composed of senior management officers of Member Companies per CSR program or area. In addition, PBSP invests time and technical support to such associations/networks as the Philippine164

Case Study: Organized Advocacy for Corporate Citizenship: The PBSP Story Development Assistance Program (PDAP), the Asia Pacific Philanthropy Consortium (APPC) and the Caucus of Development NGO Networks (CODE-NGO). f.) Having a sound financial condition has allowed PBSP to attract and leverage funding and other resources from its wide range of corporate partners, learning institutions, government and international donors. On the average, PBSP’s leverage funding is PhP1.00 for every PhP.17 cents that it sources from external funding or membership contributions. Likewise, PBSP maintains an active network with international organisations and NGOs such as the United Nations Development Programme (UNDP), European Union (EU), the Business for Social Responsibility (BSR), The Synergos Institute, The Asia Foundation (TAF), United Way International, and the Prince of Wales International Business Leaders Forum (IBLF). g.) PBSP nurtures collective action which in its practice proved to have lessened the duplication of roles and tasks, saved on precious resources, provided a wealth of information through exchange and facilitates economic and social development, thereby, making leadership a challenging, if not daunting role to pursue.Table 3. Roles and Functions of the CCC Committee: Provides the lead in identifying corporate citizenship issues Approves CCC programs and projects based on its strategic importance Acts on and responds to program implementation issues and needs Takes the lead in organizing and sustaining groups (business forum and consensus group) that will discuss and look into policy implications and be able to provide the appropriate recommendations and interventions relevant to issues confronting the business and society Enlists other business stakeholders to engage in CCC activities and programs and to advocate Corporate Citizenship tools and technologies to the wider business- community Identifies and implements resource mobilization strategy 165

8. A Call for CourageThe need to address social development issues never really diminishes. There is always a demand to bringabout equitable development and prosperity. PBSP and its member companies are committed to take onthese daunting challenges, ensuring that the responses are adequate, sustained, relevant, and strategic(i.e., giving back to society while achieving business bottom lines).For Years 2001-2005, PBSP’s response is its 7th Five-Year Strategic Plan, geared towards assisting business,government and society in their transitions towards dealing with globalisation. This 5-year strategic planchallenges PBSP to move forward as the Leader in CSR. One of the most distinct elements factored in thiscurrent thrust of the PBSP is integrating the use of information technology as a management andcommunication tool for PBSP’s leadership, and to provide its poor constituencies greater access to socialand economic development services.CCC, for now, plays a significant role in this CSR leadership-building process of PBSP. It cannot be deniedthat CCC, with the significant milestones it had carved for CSR development and practice in over a decadeof existence, has put PBSP at par with global leadership CSR organisations. Most noteworthy is thedevelopment of the Centre’s Benchmarking CC Tools,10 used to gauge CSR process and impact indicators,which also serves as the overarching framework to all CCC’s programs.But while advances have been achieved in leaps and bounds in PBSP’s more than three decades of existencein corporate-led social development initiatives, much needs to be done and accomplished. In fact, its 7 thFive-Year Plan brought PBSP back to its original premise – that the Philippines is still “a seriously fragmentedsociety, deeply divided economically and socially, where close to 50% are poor and disempowered”.11 It isa reality that is challenging the PBSP to respond more aggressively by providing stronger CSR Leadership.Thus, its more than 170 member companies recognise that it is no longer an option to provide leadershipin a “shrinking” world that demands greater corporate social responsibility and accountability.After all, this is a Call for Courage: to continue to provide leadership as PBSP’s members and staff haveboldly done over the past three decades to meet the crises of the times.166

Case Study: Organized Advocacy for Corporate Citizenship: The PBSP StoryEndnotes1 Senior Program Officer, PBSP-Center for Corporate Citizenship.2 National United Nations Volunteer (NUNV) Business-Community Relations Specialist.3 Paulynn P. Sicam, PBSP and CSR: The Adventure Continues (Article in the PBSP Annual Report 2002).4 The new administration of former President Fidel V. Ramos invited the members of the PBSP Board toserve the government in various capacities.5 PBSP – CCC Manual of Operations 2001.6 Ibid.7 Ibid.8 PBSP – CCC Manual of Operations 2001.9 2002, conducted in partnership with the League of Corporate Foundation, with funding from the FordFoundation.10 The first of its kind developed in Asia.11 Paulynn P. Sicam, PBSP 2002 Annual Report. 167

The Petron Corporation:VOLUNTEERISM IN ACTION (VIA)by Charmaine Nuguid-Anden11. IntroductionP etron Corporation is a publicly listed oil refining and marketing company that is jointly owned by the Philippine National Oil Company, the Aramco Overseas Company and about200,000 individual shareholders and a number of institutional investors.Petron supplies about 40% of the country’s petroleum needs; approximately one-fourth of theenergy used to generate electricity; one-third of the fuel to power vehicles and half of the oilconsumed in manufacturing and other industries. It has also been exporting fuel oil to China.Its modern refinery, located in Limay, Bataan has a capacity of 180,000 barrels per day. It is consideredthe biggest in the country and the first in the Philippines to be ISO 9002 certified. The refinery processescrude oil into a full range of petroleum products, including LPG, gasoline, diesel, jet fuel, kerosene,industrial fuel oil, lubes, greases and asphalts.From the refinery, Petron moves the products mainly be sea, using tankers and barges to distributeproducts to a nationwide network of depots and terminals. Through this network, it sells fuel oil, diesel,and LPG to industrial customers. The company supplies jet fuel at key airports to airlines, includingPhilippine Airlines and other international and domestic carriers. Petron retails gasoline, diesel andkerosene to motorists, public transport operators, and households through service stations, and sells itsLPG brand to consumers through dealership network. Petron maintains more than 35 depots and salesoffices and 1,162 service stations nationwide.Given the magnitude of its business, Petron operates virtually in almost every area of the country.This direct involvement with the different communities, whether in a long-term presence such as itsoffices and facilities or through participation in short-term projects such as motorist assistance,gives rise to the need for Petron to become a good corporate citizen. As such, it has institutionalizedthe “excellent care for the community and the environment” in its corporate mission.168

EBCR Philippine Country ReportIn 1996, the company established the Petron Foundation to implement projects promoting corporatesocial responsibility in the areas of education, the environment, health & social services, and culture &arts. The Foundation is presently headed by Petron Board Chairman & CEO Nicasio I. Alcantara andPresident Motassim A. Al-Ma’ashouq.This move highlighted Petron’s commitment to being responsible members of the communities where itis present, hand in hand with the conduct of its core business.VIA (Volunteerism In Action) literally means “through”, “the way”, or “path”. It serves as the umbrellaprogram of Petron’s 14 CSR projects in the areas of health & social services, culture & arts, educationand the environment. VIA mobilizes volunteers not only from Petron’s workforce but also from itsbusiness partners the communities that they serve.2. The Beginnings of Volunteerism In ActionPetron Corporation has a tradition of public service through company-initiated programs andcontributions to other efforts by government and private sector. It has been engaged in volunteerismas early as 1988 with the conceptualization and implementation of Lakbay Alalay, a motorist assistanceproject addressing heavy traffic brought on by the Holy Week holidays. Over the years, Petron hasintroduced other volunteer projects such as the medical/dental outreach programs, disaster reliefoperations, blood donations, etc.Aware of both the developments in and the demands of corporate social responsibility, Petronestablished VOLUNTEERISM IN ACTION (VIA) in 1999 to strengthen and to institutionalize its capacityto aid social development on the community, national and international levels. Petron Foundationserves as the implementing arm for the company’s Volunteerism in Action program. Through theactive participation of its volunteers, composed of employees, employees’ children, business partnerssuch as contractors and dealers, and stakeholders in the communities, Petron Foundation aims tocreate a significant influence among targeted beneficiaries & locations. 169

Petron’s programs aim to achieve the following objectives:• Provide its employees and other stakeholders with a venue to make a positive difference in society;• Undertake efforts to provide benefits to as many people as promptly as possible;• Ensure a better quality of life in key areas of concern such as education, environment and health and social services.3. The Various ProgramsPetron’s programs over the years have mostly addressed the concerns and needs of communities inthe areas of education, environment, health and social services. Since 2000, Petron undertook fourteen(14) major programs with volunteerism as its main driving force.Table 1. The fourteen (14) major programs (with its description and year of establishment) under-taken by Petron.THRUST ANCHOR PROGRAMS SUPPORT PROGRAMS Sa Aklat SisikatEDUCATION The Petron School Reading/Literacy Campaign Tulong Aral ng Petron Skills Training & Education Program Send-A-Child to School Program (STEP) Integrated Coastal Management Kontra Kalat sa DagatENVIRONMENT Program BIGKIS-BATAAN Coastal Cleanup Puno ng Buhay Tree/Mangrove Planting Smoke Emission Testing Lakbayanihan Medical & DentalHEALTH & HUMAN SERVICES Community Wellness Program Mission Lingap Kapwa Disaster Relief Operations Project Joy Christmas Program for streetchildren all the above support programs plusCOMMUNICATIONS and ADVOCACY VOLUNTEERISM IN ACTION (VIA) Lakbay Alalay Motorist Assistance Junior Achievement Philippines Petron Kids’ Summer Camp170

Case Study: The Petron Corporation: Volunteerism In Action (VIA)3.1 EducationTulong Aral ng Petron (Send-A-Child to School) – This program sends 1,000 indigent children to90 public elementary schools throughout Metro Manila. In partnership with the Department ofSocial Welfare & Development and the Department of Education, Petron Foundation provides thescholars with school uniforms, basic school supplies and a daily meal allowance. Volunteerism is inthe form of financial donations to the program, or through the volunteers joining school and homevisits to check up on the progress of the scholars.The Petron School – Government aims to provide a public school for every barangay in the country(at present, there are more than 4,000 barangays which have no school within their communities).Petron Foundation complements this through the donation of PETRON SCHOOLS, 3-classroom schoolbuildings that will be built over a period of five years in needy areas across the Philippines. Theprogram, is jointly implemented by Petron Foundation, the Philippine Business for Social Progress(PBSP) and DepEd in close coordination with the respective local government units and the Parent-Teacher-Community Association (PTCA) of recipient schools. The first PETRON SCHOOL has alreadybeen opened to students of Sta. Cruz Elementary School in Brgy. Sta. Cruz, Tagoloan, MisamisOriental. Volunteers from the Petron Bulk Plants within the vicinity of the Petron Schools help inthe coordination of the school’s physical development as well as in monitoring its condition.Sa Aklat Sisikat (Books Make You Cool!) - A reading literacy campaign in partnership with Sa AklatSisikat Foundation, Inc. and in support of the Adopt-A-School Program by the Department of Education,it aims to develop in children the love of reading and an awareness of values through books. Throughthis, Petron Foundation strengthens its own literacy campaign through the TUKLAS by expanding itsnetwork of assistance from barangays to public elementary schools. The literacy campaign focuses onnine-year-olds (Grade 4 level) because according to research, it is at this stage that they start readingfor learning. Volunteers help mainly in the actual implementation of the campaign, where they attendreading sessions and help evaluate the progress of the children’s reading abilities and the teachers’implementation of the program.Skills Training & Education Program (STEP) - After giving children a chance to get a formaleducation, Petron Foundation is providing a venue for their future employment through the PetronSkills Training and Education Program or STEP. Beneficiaries of STEP – out-of-school youth, childrenof public utility vehicle drivers –undergo academic training to become Petron service stationattendants and when possible, to qualify for a management position in the service station. Otherpartners in STEP include Petron Retail Sales, Retail Training School, Petron Dealers’ Association,Technical Education and Skills Development Authority, and the Federation of Jeepney Drivers andOperators of the Philippines. 171

Junior Achievement Philippines – Through the JA Philippines, Petron provides select studentsfrom some 15 colleges and universities in Metro Manila with practical knowledge on businessvalues that develop their skills, abilities and confidence as entrepreneurs. Volunteers serve asMarketing, Finance or Production Advisers to the JA Philippines Mini-Company program.Petron Kids’ Summer Camp – Through this program, children of Petron employees enjoy summeractivities such as educational trips, sports development and arts appreciation. Employees aredesignated “elder brothers and sisters”, and through the different activities, they are also assignedto teach the proper values in the kids, such as discipline, teamwork and respect.3.2 EnvironmentKontra Kalat Sa Dagat (Movement Against Sea Littering) and Coastal Care in Bataan. Togetherwith the Bataan Provincial Government, Petron regularly invites its employees to take part in KontraKalat sa Dagat (KKD), the coastal cleanup of Bataan’s shorelines, hand in hand with other stakeholdersof the province. KKD is part of Bataan Integrated Coastal Management Program in partnershipwith the provincial government and United Nations Development Programme (UNDP). Volunteershelp-out in the actual cleanup, serve as data recorders, assist the medical team, or help out ininformation dissemination.Puno ng Buhay (Tree and Mangrove Planting) – A regular commitment of the company to help inreforestation efforts for both land and coastal habitats through various tree-planting activities, inpartnership with national and local agencies, as well as with private foundations. Volunteers fund thepurchase of seedlings and mangrove propagules or join the actual tree planting.Smoke Emission Testing - in cooperation with the League of Corporate Foundations (PetronFoundation is an active member of the Environment Committee). This project complements effortsto comply with the Clean Air Act and provides a venue for motorists to be aware of the problem ofair pollution. Employees and company friends are encouraged to voluntarily submit their vehiclesto a periodic review of the quality of their smoke emission.Employees involve themselves by means of employee-led fundraising (includes cash and non-cashdonations solicited from sources other than the employees), employee giving (includes salary deductionschemes, donation to specific causes through boxes placed strategically inside the office premises,pass-the-hat endeavors), sharing of expertise (includes secondments, mentoring, pro bono services)and outreach programs (includes participation in medical/dental missions, tree planting, coastal cleanups,visit to orphanages, etc.).172

Case Study: The Petron Corporation: Volunteerism In Action (VIA)4. Existing VIA ProceduresThe VIA follows a six-stage process, and as shown in Figure 1, the process does not end in monitoringand evaluation since data from this stage will serve as guide in identifying upcoming project needs andspecifications. Figure 1. The Six-stage VIA procedure 1 – Program / project and Beneficiary identification 2 – Volunteer recruitment 6 – Monitoring and evaluation and mobilization 3 – Internal communications 5 – Measurement and reporting and promotion 4 – Coordination with regional offices/ bulk plants/ partners/communities; Program Implementation 173

STAGES IN-CHARGE ROLES AND RESPONSIBILITIES Stage 1. a. Petron Foundation, Inc. a. Formulation of Vision/Mission, Program / Project Board / Management Objectives and Success Indices and Beneficiary Committee b. Policy-making Identification b. Foundation Staff c. Planning of strategic priorities c. Petron Divisions/ Regional d. Identifying benchmarks (e.g Offices Heads current health trends existing in d. Marketing, Refinery, communities; communities) Operations, Refinery; e. Research data and evaluation Human Resources-Medical results pertinent to the project e. Employee Volunteer Council Step 2. a. Foundation Staff a. Project Brief: Mechanics which Volunteer b. Employee Volunteer Council would show the number of Recruitment and c. Petron Ladies Club volunteers needed and logistical Mobilization d. Petron Divisions: HR- requirements Medical, Marketing; b. Announcement through e-mail, Operations, Refinery memos, posters, brochures, website, Petronotes/ Petronews Step 3. a. Foundation Staff Utilizing appropriate communications Internal b. Corporate Communications tools: e-mail, memos, posters, Communications and brochures, website, posting, Promotion Petronotes/Petronews Step 4. a. Foundation Staff Coordination and implementation of Coordination with b. Petron Divisions: HR- projects and mobilization of volunteers Regional Offices/ Medical, Marketing, in different regions/ provinces Bulk Plants Operations, Refinery Step 5. a. Foundation Staff a. Gathering of Baseline Data before Measurement and b. Employee Volunteer Council project implementation Reporting c. Petron Divisions: HR- b. Setting Target Results and Success Medical, Operations Indices before project implementation c. Determination of quantifiable data after project implementation (e.g. # of seedlings planted, # of motorists assisted, # of patients diagnosed, etc.) Step 6. a. Foundation Staff a. Securing partnerships with local Monitoring and b. Employee Volunteer Council representatives who would Evaluation c. Petron Divisions: HR- eventually own the project assuring Medical, Operations its sustainability b. Maintains scheduled regular visits and Maintains scheduled regular visits and assessments of project development assessments of project development174

Case Study: The Petron Corporation: Volunteerism In Action (VIA)The identification of VIA programs is led by the Petron Foundation staff. With representatives fromthe Human Resources-Medical Division, Employee Volunteer Council and the proponents requestingfor outreach programs, Petron Foundation chooses from the potential projects, which are initiallysuggested by employees from the industrial and marketing groups nationwide. Parameters forqualifying project priorities are not specific although Petron Foundation considers financial and logisticalviability as crucial factors in selection.In most cases, advance research teams are sent to locales of prospective projects to gather baselineinformation to determine definite programs and plans of action. Medical outreach programs, for instance,headed by Dr. Georgina Duque, current chairman of the Employee Volunteer Council, require baseline dataso the volunteers know what health trends exist in – or in some cases, possibly threaten – a community(e.g. common illnesses, availability of medicine). Of equal importance are logistic considerations such asthe availability of tap water and supply of electricity. Coordination with local government officials – aswell as with local Petron offices – is crucial because their presence and the pertinent data already in theirpossession minimizes volunteer legwork. According to Dr. Duque, data gathered here is the most vitalaspect in the process of carrying out VIA projects because they provide an updated status check ofpotential beneficiaries. Thus, outreach groups like Dr. Duque’s can look into and deal with problemsof specific communities more accurately and more extensively.Once results from the advance research teams come in, volunteer recruitment and mobilizationbegin. According to Ms. Lolita Apuhin, Vice-Chairman of the Employee Volunteer Council and primarilyin-charge of volunteer recruitment, seeking volunteers and inviting participants are not difficult,especially since Petron Foundation has developed a solid volunteer base. She says she owes this tothe employees’ determination to go beyond the corporate walls and to experience an environmentdeprived of the usual privileges they enjoy. She admits that the latter even helps willing individualemployees to reinforce – or in most cases, restructure – their personal values system.Ms. Apuhin cannot point to any one particular hindrance to employee participation although basedon her experience, she considers conflict between work and volunteering schedules as a factor in anemployee’s availability. In spite of positive word-of-mouth from their colleagues who participate inoutreach programs, Ms. Apuhin bares that some employees fail to join volunteering projects becauseof tight work schedules but they still make up for their physical absence mainly through financialcontributions and sharing of expertise.After research and extensive preparation including coordination with other organizations with whichPetron may partner with in a program, on-site activities begin normally on the eve of the project date.After each event, program coordinators measure and evaluate the success of the activity based on pre-determined objectives and success indicators. Results are then collated as part of the Project Reportwritten up by the coordinators. 175

5. Monitoring and EvaluationTo ensure that the objectives of VIA are effectively realized, Petron Foundation drew up a frameworkwhich serves as the guidelines by which the progress of each project can be measured. Six main points, orKEY SUCCESS FACTORS, were identified, with each factor or component defined in concrete terms toprovide the indicators of the success of the VIA: 5.1 Clear Directions - Clarity of Petron’s mission and values, which define the company’s corporate citizenship thrust in general and their volunteerism program in particular. - A focused, integrated and carefully managed program that seeks to effect a positive change in the areas of education, environmental care & health and human services for the betterment of the community. 5.2 Effective Leadership - Strong, active and visible support of the Chairman, President and CEO, Vice Presidents, managers and employees. - Spending executive time to sit on the boards of nonprofit organizations. - Personal involvement of top provincial and local officials. 5.3 Active partnership with and enthusiasm of stakeholders - Employee volunteers come from all levels, across all divisions, including employees at company sites in Luzon, Visayas and Mindanao, allowing for cross-functional team composition, offering teambuilding activities built around service. - Strong and active involvement of people at the local level (provincial and local officials, community leaders, NGOs, business, schoolchildren) helps integrate the company with the needs of the community. - Strong and consistent participation of business partners, including service station dealers, as volunteers. - Creating new partnerships and strengthening existing ones to establish a shared vision and common strategy towards greater stakeholder participation. 5.4 Direct personal involvement - Caring and service go beyond simple monetary and in-kind contributions; rather, they include personal and hands-on involvement in the communities through the sharing of their expertise and talents.176

Case Study: The Petron Corporation: Volunteerism In Action (VIA) 5.5 Appropriate systems and structures - Detailed strategies, work plans, guidelines and mechanics of implementation using relevant management tools and efficiently managed by a core group of individuals - Thorough orientation and debriefing sessions - High degree of integration/close links with other departments: Corporate Communications, - Marketing, Operations, Bataan Refinery, HR and Medical - Formation of An Employee Volunteer Council - Investing in a well-planned internal and external communications campaign which builds support and value for the program and helps promote a positive image of the company - Implementation of a corporate matching program - Favorable consideration by management of a proper recognition and rewards system to be integrated with the company’s appraisal system. 5.6 Personal growth opportunities/empowerment - Allowing all volunteers to feel a real sense of involvement and fulfillment beyond their daily professional chores by creating various opportunities for them to make a real difference in the world at the cost of their personal time and expecting nothing in return. - A direct way to gain a deeper sense of understanding of and commitment to the needs of society by directly addressing the issues that confront it — environmental stewardship, promotion of literacy, and social & human development.6. Volunteerism In Action’s Lessons6.1 Program StrengthsAccording to Ms. Marilou Erni, Executive Director of Petron Foundation, their team has what it takesto promote and to run a successful volunteerism campaign primarily because of strong and visiblemanagement support. Aside from the allocation of funds and other resources, members of themanagement consistently volunteer to be involved in several activities (former VP for Corporate Planningearned the moniker Mr. Kontra Kalat sa Dagat for joining almost all the coastal cleanup activitiesparticipated in by Petron). With a clear mandate from management advocating social responsibility,Petron not only encourages its employees to participate in the implementation of various programs,but also empowers them to participate in policy-making and systems set-up. Members of the EmployeeVolunteer Council determine arrangements for transportation and food purchase/distribution duringactivities, as well as in determining volunteer assignments. According to Ms. Erni, this is a testamentto the corporation’s collective thrust to foster the spirit of service to others. Ms. Erni further atteststhat the performance indices devised by the Foundation to measure the success or the failure of theiractivities have been a vital factor that contributed to the success of their program. 177

Most importantly, the Foundation hopes to empower communities to do volunteer work amongthemselves, even when Petron is no longer present to manage projects for them. As an example, shepoints out a coastal cleanup campaign in Mariveles, Bataan where the local folk have continued to dosanitation activities despite the absence of Petron. This same coastal cleanup campaign is only acomponent of the UNDP PEMSEA integrated coastal management program in that area, whereinPetron stands as the private sector champion. Table 2 summarizes the contributions of volunteers tothe programs undertaken by the Petron Foundation.Table 2. VIA 2002 Facts and Figures Duration in months of full project 12 months (Jan-Dec 2001) 12 months (Jan-Dec 2002) %age of volunteers from total employees 84% 88% average no. of programs volunteered for 4 programs 4 programs %age of divisions with volunteers 100% 100% average increase in division volunteers 24% 20% %age of executives who volunteered 100% 90% 100% among 52% of 100% among 40% of %age of volunteers from participating bulk participating bulk plants participating bulk plants plants and satellites and satellites Increase in volunteer hours over 1st year 39,599 hrs 11,947 hrs Total volunteer hours 385,875 hrs 385,223 hrs Increase in value of volunteer hours over P2.5 million P.5 million 1st year total value of volunteer hours P24.1 million P36.15 million total number of projects for volunteer work 14 programs 14 programs178

Case Study: The Petron Corporation: Volunteerism In Action (VIA) Table 3. Project Impact for 1,091 Employee Volunteers and 83,694 Petron Volunteers PROJECT IMPACT FOR 1,091 EMPLOYEE VOLUNTEERS AND 83,694 PETRON VOLUNTEERS IS SIGNIFICANT OVER 12 MONTHS IN 2002 88% of employees volunteered 1,728 motorists aided 1,000 children from urban poor communities 73 volunteers from Petron families gained sent to public elementary school 8,700 children from 48 schools benefitted 17,049 beneficiaries of Project Joy from reading campaign 170 teachers trained as part of reading 103 children graduated from Summer Camp campaign 7,800 books distributed as part of reading 14.45 km of coastline affecting 15 barangays campaign cleaned 12,122 patients served 27.6 metric tons of garbage collected P985,100.00 worth of medicines donated 1,066 kgs. of old newspapers turned over for recycling P50,000 worth of relief goods distributed 180 mahogany and 300 banaba seedlings and 25,800 mangrove propagules planted 10 homes built for family occupancy 23,923 non-staff volunteers gained 65 vehicles tested for smoke emission6.2 VIA and its Effect on SocietyBy supporting volunteerism, employees (and the company) can learn about community needs/issues beyondthose associated with a single event or organization, as well as how to get involved and help out.Petron’s various corporate social responsibility programs have greatly encouraged volunteerism fromamong company members and various stakeholders as well. Through these programs, Petron hasmanaged to effect positive changes in society. For example, through its partnership with the UNDP-International Maritime Organization for an integrated coastal management program, the companywas able to rally the local private sector in the area of Bataan to form a private sector body that co-manages the program. This body also serves as an anchor for the sustainability of the program inlight of the short terms of local government officials (3 years) and ensures a long-term public-privatepartnership. 179

With VIA, the employees of Petron are able to become catalysts of change towards the achievement ofa better life for the communities that they become involved with. The programs have galvanizedconcerned citizens and institutions into a partnership aimed at optimizing their resources to dogreater good. This partnership in return, has served to improve relations with the community and itslocal leaders. It has in turn succeeded in generating the volunteers’ growth and self-worth whilelending a hand to bolster the company’s position in the eyes of its public.6.3 VIA’s Way AheadStill, Ms. Erni believes that there is much room for improving and making Petron’s VIA Program evenmore successful. According to her, she would like to see increased numbers of employees participatingfrom all divisions of the company, as well as an increase in the number of volunteer business partnersand local government leaders involved in their projects. Over the years, Petron Foundation would liketo see volunteerism impact on the recruitment, productivity, retention and morale of employees.Petron is committed towards supporting the improvement of the operations and structures of EmployeeVolunteer Councils and will continue to refine the systems and measures of their various activities.Summing up the way VIA has shaped them, a supervisor of Petron’s Financial Accounting Departmentechoes a common feeling among the volunteers of Petron: “If in the end, my students would tell me that they appreciated my efforts to impart knowledge to them, what would be nicer to hear than that? If in the end, my boss would acknowledge that I did a good job, can I ask for anything more? If in the end, my co-employees would start to be curious what the program is all about, won’t I feel elated that I started to make them aware of this endeavor? And…If in the end, I feel good inside knowing that I did my best, no matter how humble my contribution was, can any amount of money buy that? I have always believed that life is a continuous learning process and if in my own little way I am able to contribute to educating the youth, then my day is made!”180

Case Study: The Petron Corporation: Volunteerism In Action (VIA)ReferencesPetron Foundation Annual Report, 2001Petron Foundation Annual Report, 2002“Corporate Volunteerism: Innovative Practices Fort the 21st Century,” by Jared Thomas Cook and Linda B. Gornitsky, Ph. D., LBG Associates, 2000.Integrating Corporate Community Involvement for Added Value: Trends and Case Studies., published by the Council on Foundations, USA, 1996Measuring the Business Value of Corporate Philantrophy, developed by Walker Information, Inc., for the Council on Foundations, November 2000“Encouraging Company Employees to Volunteer,” by Sheryl Wiley Solomon, Barbara O. Ragland, Eugene R. Wilson and Myrna Plost, Ch. 23, The Corporate Contributions handbook“Young Women Volunteering In Asia,” by Dr. Kang Hung Lee, paper presented during the Young Asian Women Volunteers Congress, May 21-24, 2001, Quezon City, PhilippinesEndnotes1 National UNV - BCR Specialist. 181

Building Community Partnerships: The CommunityTechnical Working Group (CTWG) ExperienceSILANGAN MINDANAO EXPLORATION COMPANY, INC.by Charmaine Nuguid-Anden and Gay Benueza11. IntroductionT he Philippines is gifted with considerable mineral deposits, particularly of gold, copper and nickel, and other metallic and non-metallic minerals. Throughout the years, the government hasallowed, some would say encouraged, exploration and mining activities. Weighing the economicbenefits of the mining industry against the possible risks to the environment typifies the developmentdilemma. Thus, the decision to allow mining is always a crucial one. In the Mining Act of 1995, thePhilippine government managed a tight balancing act when it declared “ it shall be the responsibilityof the State to promote the rational exploration, development, and utilization of all mineral resourcesthrough the combined efforts of government and the private sector in order to enhance nationalgrowth in a way that effectively safeguards the environment and protect the rights of affectedcommunities.”In a traditionally controversial industry as mining, the government, the private sector and thecommunity represent varied but not necessarily conflicting interests. While the mining industry hastraditionally contributed substantially to the gross domestic product, there is a need to ensure thatsuch economic benefits are enjoyed by all, and that local residents are informed and involved indecisions that affect not only their livelihood but their immediate surroundings. The Mines andGeosciences Bureau, in performing the fresh mandate given by the Mining Act of 1995, is in theprocess of sharpening its capacity to rationally administer mining contracts in a way that benefitsthe community without needlessly jeopardizing the environment. Mining companies, meanwhile areincreasingly concerned about the environmental impact of their operations while tapping naturalresources to contribute to economic development.182

EBCR Philippine Country ReportThe key is in identifying mutual interests and finding a way to work together. This case will show how avoluntary and multi-stakeholder group provided the mechanism for the Silangan Mindanao ExplorationCompany, Inc. (SMECI), the Mines and GeoSciences Bureau in Region XIII (MGB RXIII) and the hostcommunities to jointly address concerns on the possible impacts of the exploration project. Finally, thecase will illustrate how early stakeholder engagement and transparent relations between business andcommunities make for sound business sense.2. Engagement ProfileSilangan Mindanao Exploration Co. (SMECI) is a joint venture of Philex Gold Philippines, Inc.(PGPI) and Anglo American Exploration Phils. Inc (AAEPI) formed in September 1999 specifically to conductexploration activities in the Surigao Gold District. PGPI is a subsidiary of Philex Mining Corporation thatcurrently operates one copper-gold mine. It is one of the leading copper exporters in the Far East. It is apublicly listed company in the Philippines and its gold subsidiary, Philex Gold Inc. is listed at the TorontoStock Exchange. AAEPI is one of the world’s largest producers of platinum, gold, diamonds and otherminerals. Copper and gold exploration activities in the area, started in 2000, include geologic mapping,geo-chemical surveys, geo-physical surveys and drilling. In the joint venture, Philex is responsible forenvironment and community development while AAEPI manages actual exploration activities.The Mines and Geosciences Bureau in Region XIII. The MGB, a line bureau of the Departmentof Environment and Natural Resources (DENR), is expressly mandated by the Mining Act of 1995 “tohave direct charge in the administration of disposition of contracts, agreements or permits relatingto mineral lands and mineral sources (Section 6, DENR AO 23, Series of 1995). MGB XIII has jurisdictionin the project site in Surigao del Norte in the CARAGA Region of Southeastern Philippines.Barangays2 Timamana and San Isidro in the municipality of Tubod are the host communities.Lying in the eastern portion of the Surigao Gold District (SGD), the adjacent barangays are no strangers tomining. While primarily agricultural, with 95% of the combined area of the two barangays planted to riceand coconut, the presence of the ore-rich mountains bordering the barangays have accustomed thepopulation to mining, both to its costs and benefits. While most of the residents had been anticipating thediscovery of precious minerals in their midst, and awaiting the economic windfall this would bring, a fewteachers and a local water organization were concerned about the possible negative effects of the projecton the environment, particularly on their water source. 183

3. Digging for Gold, Engendering TrustPhilex Gold became interested in seriously exploring the so-called Surigao Gold District after preliminaryassessments made in the early 1990s. At the end of 1999, a Mineral Production Sharing Agreement(MPSA) permit had been granted to Philex and later transferred to the recently formed SMECI to explore402 hectares in northeast Surigao.While the residents had heard of neighboring communities’ negative experience with other miningcompanies, Barangay Captain Edeltrudo Nalitan of Timamana said that the residents are pragmatic – theyknow that mining is a reality in their lives. Thus, they were not surprised when they found out in 2000that a mining company had been awarded the right to explore for ore in their mountains. However, as thepermit was issued at the national level (through the DENR), local communities felt that they had been leftout of decisions which directly affect their lives. Further, it seemed to them that there were few availablemechanisms by which they can voice their concerns on the exploration activities.SMECI acknowledged the need for information and the mixed feelings amongst local residents andstakeholders that surround exploration activities. Given Philex’s years of mining experience in the North, itwas well-prepared in meeting the challenge of working with the communities and stakeholders. It rolledout an Environmental and Community Development (ECD) Program guided by its mission statement of“upholding at all times a sound environmental policy and fulfilling our obligations to the community as aresponsible corporate citizen.”Philex’s core strategy is hinged on engagement with the community. “SMECI is committed to forge willfulpartnerships with host communities to help improve the quality of life and promote sound environmentalmanagement.” This is implemented through the “active and meaningful participation of stakeholders throughcommunity consultation and planning.”The ECD has several components: The Information, Education and Communication (IEC) Program is beingimplemented primarily by three community organizers who had been living in the area to immerse themselvesin the community way of life. Through focus group discussions (FGDs) and informal meetings, they hadbeen in touch with the community’s needs and perceptions regarding the exploration activities. Philex’sHead for Environment and Community Development Department (ECD) became the focal person for easingin the SMECI’s activities in the local barangays by coordinating closely with local government offices.Visits to Philex mining operations and host communities in the North were sponsored to give stakeholdersand local leaders a first-hand view of how Philex manages its projects. The Chairman/CEO of Philex,likewise, had been visiting the communities and meeting with local officials and sectoral leaders to listento and address their concerns, apprehensions and suggestions. A Community Information Center is beingmaintained to facilitate access and communication between company and the community.184

Case Study: SMECI’s Building Community Partnerships: The Community Technical Working Group (CTWG) ExperiencePhilex takes community relations a notch higher:it invests toward community development. It is Box 1. SMECI Community Developmentvoluntarily implementing a Community PlanDevelopment Plan in consultation with the residents(see Box 1). Information and Communication Education CampaignBut still, MGB XIII monitoring reports showed Community Organizing: Strengthen orbrewing opposition to the company’s activities from organize people’s organizationsa small group of residents, particularly on the Water System Improvement: Improvepossible effects of the drilling activities on the water supply & safe drinking watercommunity’s water source and supply. However, the Assist in improvement of schoolreports noted too that the majority of residents facilities/infrastructurewanted the company to continue its activities in Donation of community requestedorder to ascertain whether a sizeable gold deposit materials for improvement of publicdid exist. facilities Tree and Vegetable NurseryMGB-XIII Chief of Information, Education and Maintenance and Seedling DistributionCommunication-Community Development (IEC-CD) Scholarship program for elementary andand Community Relations, Organizing & high school studentsDevelopment (CROD) Training Officer Filemonito Health: Sponsorship of Medical“Mon” Monteros, noted that most mining Missions and Donationscompanies were not ready nor willing to adopt thestricter requirements set by the Mining Act. Heregards this clinging to old habits not asmalicious on the part of the companies but as resistance to change and innovation. Unfortunately,this serves as the seedbed for apprehension, misunderstanding and conflict between companies andcommunities given the controversial nature of the industry.In the case of SMECI’s exploration activities, MGB XIII inspections showed that SMECI had been usingefficient and sustainable drilling practices, including rehabilitation of drilled and sump areas. Watersamples collected had traces of copper and arsenic, but this was considered natural and due to the factthat the water source was in a mineralized zone. Despite these findings, the communities were stilluneasy. In a letter to the Municipal Mayor of Tubod, MGB XIII recommended the formation of a multi-sectoral group to conduct monitoring specifically of the water source in Timamana. As Mr. Monteros putit, “People don’t trust what they can’t see on a regular basis – you build trust with inclusion”. 185

4. The Birth of the CTWGWith that key reflection in mind and taking inspiration from the Mining Act, MGB XIII broached the ideaof forming a multipartite monitoring team (MMT) although is not a requirement for companies in theexploration stage.The idea was novel, and one that SMECI voluntarily committed to. While SMECI could easily draw on theassistance of the barangay councils and the MGB in calling for community meetings, it welcomed the ideaof a multi-sectoral forum chaired by the MGB as it had the mantle of legitimacy. SMECI’s voluntaryinvolvement in the monitoring group would all the more reflect the company’s commitment to transparency.Likewise, the idea was consistent with SMECI’s framework of working with its stakeholders. Fig. 1 SMECI Environment and Community Development Framework SUPPORT SMECI 3 4 4AGENCIES COORDINATION 4 PARTNERSHIP SUPPORT 4 4 ACTIVE PARTICIPATION COMMUNITYMGB XIII Community Organizers began the legwork of scouting potential members for an MMT- typeorganization. In the case of SMECI, MGB XIII mulled an expanded composition to include other sectorssuch as the local Department of Health, the provincial environment officer (DENR-PENRO), land owners,LGUs, concerned socio-civic organizations and the Church, among others.At the time, SMECI through Philex was voluntarily working on a Social Development and ManagementProgram (SDMP), again a requirement only for operating mines. It was during a technical conference onSDMP preparation conducted by MGB XIII that the formation of the monitoring group was fleshed outmore fully. To avoid confusion and to differentiate it from the legally-mandated MMT, the name “CommunityTechnical Working Group” or CTWG was adopted.186

Case Study: SMECI’s Building Community Partnerships: The Community Technical Working Group (CTWG) Experience On 14 March 2001, the CTWG held its first meeting Box 2. The Model: MMT as envisioned in attended by the MGB XIII, the DENR-PENRO, Barangay the Mining Act Committee Chairpersons on Environment, Health & Sanitation and Youth for Barangays Timamana and San The Implementing Rules and Regulations Isidro, Timamana National High School, Water of the Mining Act provides for the formation Sanitation Organization (WATSAN), the Philippine of the MMT as the recommending arm of Independent Church, the Seventh Day Adventist the Mine Rehabilitation Fund Committee Church, local government officials for Environment, (MRFC). The MRFC is the decision making Health and Agriculture and SMECI. A week later, on body at the regional/local level regarding 22 March 2001, a Memorandum of Agreement (MOA) monitoring issues, plans and strategies was signed by the CTWG members. specifically relating to conditions set in the Environmental Compliance Certificate and The MOA spells out the objectives of the CTWG: “To other permits obtained. The MMT would verify issues and complaints of the community about also gather information to facilitate environmental disturbance and other social concerns” determination of causes of damages and and “to ensure that appropriate mitigating and validity of public complaints or concerns community development measures have been observed and to monitor implementation of the and put in place by SMECI for the protection, company’s Environmental Protection and development and enhancement of the surrounding Enhancement Program (EPEP). The MMT environment and communities. Toward this, the CTWG includes representatives from the Regional shall a) monitor active and abandoned sites; b) monitor MGB as head, Regional DENR, contactor/ surface and ground water; and c) conduct community permit holder, affected community/ies, needs diagnosis and other community development affected Indigenous Community/ies and an activities.” The MOA further stated that membership environmental NGO. to the CTWG is voluntary and unpaid. The CTWG conducts inspection visits quarterly.5. The CTWG: Working Together for Mutual GainsThe CTWG has since been conducting monitoring visits to the exploration sites on the last Friday of everyquarter. During the exit conference held after each visit, the CTWG deliberates on concerns raised andmakes recommendations to SMECI. To illustrate the work of the CTWG: In the first monitoring visit, it wasdecided that water samples were to be taken and sent to the Environment Management Bureau of theDENR for analysis. Test results showed that water quality was well within government standards. Severalrecommendations were also made: to address the water content of sludge seeping through one of thesumps, to provide temporary toilet facilities in each active site, and to inform the CTWG of new drill sites.All these were satisfactorily addressed as reported in the 2nd monitoring report. 187

This collaboration characterizes the work of the CTWG. The genuine concern and interest of CTWG membersis evident in their voluntary services. The MOA specifically provided that “ membership to the CTWG is acall of public service… henceforth, all members are not entitled to any form of monetary compensation orallowances from the MGB or SMECI.” CTWG members felt that their work should be above any suspicion,and that their findings and recommendations would be deemed more acceptable and objective if they arenot compensated financially. For them, it was enough that they are put in a position of serving thecommunity.One CTWG member who is known to represent anti-mining sentiments pointed out that his membershipshows that they are not there to simply criticize but to help improve the environmental practices of thecompany.In its report, MGB XIII noted that “SMECI has continuously exerted its efforts in complying with theenvironmental management measures committed in its Environmental Work program especially on thecommunity relations aspect. Given such accomplishment plus its strong collaboration with the multi-sectoral CTWG, hopefully, the company will enjoy the support of the host community in its future explorationprograms.”6. AnalysisThe voluntary formation of the CTWG is an original experience in the Philippine mining industry. CTWGmembers explain that this effort was not something they were willing to expend for any other company.The willingness of SMECI to voluntarily subject itself to monitoring by a multi-stakeholder group this earlyin its operations reinforced the idea that the company had nothing to hide, which engendered trust on thepart of the community.One of the keys in working together is finding and enlarging common ground: the mutual interests of thecommunity and SMECI could be the foundation of working together. The CTWG experience is showing thattransparency could be the foundation on which trust could be built, and in the process the stakeholdersare discovering that mutual gains could be identified.SMECI. As part of the joint venture agreement, Philex took the lead in the environmental compliance andsocial responsibility aspects of the business. Philex is a pioneer mining company in the Philippines andenjoys a well-founded reputation. Host communities in its premier operations in northern Philippineswere named one of the 50 best communities globally by the UNDP in 1995. The same practices thatbrought that recognition were applied in the SMECI venture.188

Case Study: SMECI’s Building Community Partnerships: The Community Technical Working Group (CTWG) ExperienceThis same sense of advocacy and personal accountability is encouraged throughout the whole organizationas a matter of policy and leadership. The Philex Environment and Community Development Head relaysthat the management is supportive of the activities that are initiated on the field, saying that “themanagement trusts them to do what is good for both the community and the company”.As a matter of policy, the company enters in partnerships with all its stakeholders. SMECI has an expansiveview of what it sees as its communities. They explain that their stakeholders are not just the host communitiesof Timamana and San Isidro in the municipality of Tubod but also other nearby areas like Sison, Placer andMainit. More importantly, they say that stakeholders are anyone showing interest in sharing responsibilitiesand resources, which could include suppliers, contractors, consumers, shareholders, and employees.SMECI’s early engagement with its stakeholders makes business sense in such a highly regulated industry.While SMECI intended to comply with all environmental requirements, and in fact went beyond byimplementing a Social Development Plan when it was not a requirement for companies in the explorationstage, it welcomed the idea of the CTWG. In line with the joint venture’s values and practices, SMECIrecognized the long term benefit to company operations of social acceptability with the host barangays,including cause-oriented NGOs. SMECI is concerned with long-term benefits for the communities as well.The company’s efforts at community development have already spawned rumors that the area holds“world-class” deposits of gold, but for Philex, this is simply living out the ecological credo of “leaving aplace better than when you found it.” Whether it strikes gold or not, Philex seems to be already contributingto the community’s development.MGB notes that the plethora of laws on how exploration and mining companies must relate with itsstakeholders and comply with environmental and social acceptability requirements are indicative of thehighly regulated nature of the industry. Given this environment, the MGB Region XIII sees the need to gobeyond compliance monitoring, or at least to conduct its monitoring work in a manner which promotestransparency in its relations with all the stakeholders to a mining concern. MGB Region XIII is fortunatelystaffed with people from varied employment backgrounds- some came form mining companies whilesome interestingly came from NGOs engaged in mining communities. The mix of orientations enrichedthe perspective of the agency, allowing the personnel to appreciate the various points of view in a miningconcern.MGB maintains that ensuring compliance to legal mechanisms requires a strong, innovative and flexiblemulti-stakeholder advocacy position to address the negative perception of the general public of the industry.Previously, MGB was more focused on IEC campaigns. After a careful review, MGB XIII redesigned itsactivities to be more participatory and sustainable and included community development thus, institutinga built-in structure for IEC-CD. MGB XIII found that most companies were willing to comply with the lawif the agency used a partnership, instead of a confrontational approach. 189

This partnership approach provided companies the environment to be honest in its assessment of itscapability to comply with the law. The MGB reiterated that communities must be involved first-hand in alldecisions that relate to them, and that companies must conduct this in a sustainable manner. MGB XIIIconducted region-wide industry trainings on community organizing attended by invited mining companiesin the region, as well as individual company consultations. In the case of SMECI, partnership is a crucialelement as it voluntarily implements what is only required for operating companies.Community. The host communities found a voice in the CTWG. Where before the community decriedtheir lack of involvement in the national government decision to grant an exploration permit, now theyhave a direct hand in monitoring the terms of such a permit. In addition to the information available fromSMECI, community residents had an alternative source in the CTWG, whose members are barangay residentslike themselves and who are presumed to have the barangays’ interest at heart.The community is learning self-respect, participation and empowerment from its relationship with SMECI.While it would have been easier for SMECI to dispense favors and projects to the communities, it departedfrom the usual dole-out of goods and services. Instead, it instilled in the community the need for counterpart,whether financial contribution or in the form of labor and services, in every endeavor. In the communities,SMECI acts more like a social development NGO than a company simply complying with legal requirements.It organizes, develops and strengthens small micro-finance groups by providing technical assistance likebookkeeping. Small capital is provided to organized groups after careful assessment of the intendedlivelihood ventures.Whether SMECI finds a “mineable” reserve or not, the host communities have already benefited from theprojects, skills and technologies generated by the community development efforts of the joint venture andmore importantly from the experience with participation and empowerment.7. The Way Forward…Because of the intense level of cooperation that the CTWG has engendered, some parties have accusedthe MGB and the community of acting as collaborators in a “greenwash” campaign. However, sincethe members are local residents themselves and front-line implementers within their respectiveagencies, the CTWG is perceived as generally more objective and candid in its monitoring and assessment.Because the MOA provides clarity of roles and functions for the members, the group has not onlysteadily gained credibility among other mining districts, but also among the anti-mining critics withinthe community. Most importantly, the community has a full sense of ownership of the CTWG, knowingfully well that it is a voluntary commitment on the part of all participants.190

Case Study: SMECI’s Building Community Partnerships: The Community Technical Working Group (CTWG) ExperienceGiven the success of the CTWG model, the MGB spearheaded the expansion of the concept to include thewhole province, culminating in the Provincial Mineral Resource Management Council. Centered on localBusiness Development Centers, this collaborative network is focused on preparing mining companies to beresponsive to communities. MGB XIII thus hopes to demonstrate that mining could be both “pro-environmentand pro-people.”SMECI has raised the compliance bar for all other mining companies by voluntarily submitting to themonitoring work of the CTWG. It hopes that its transparent dealings with the community promotepartnership and hopefully contribute to the barangays’ community development.The CTWG is redefining the contours of tri-sectoral partnerships by showing that multi-sectoral groupscould be effective monitoring mechanisms in a highly controversial issue such as mining and explorationactivities. The challenge for CTWG is to continue its zealousness and objectivity in its monitoring.In the meantime, SMECI and the barangays of Timamana and San Isidro, together, are still looking for gold.ReferencesRepublic Act No. 7160. Local Government Code of 1991Republic Act No. 7942. Philippine Mining Act of 1995SMECI Environment and Community Development Program DocumentsMines and Geosciences Bureau Region XIII Reports on the Community Technical Working GroupEndnotes1 National UNV - BCR Specialist and Lead Writer, respectively.2 As the basic political unit, the barangay serves as the primary planning and implementing unit ofgovernment policies, plans, programs, projects, and activities in the community (Local Government Codeof 1991 or Republic Act No. 7160). 191

Sun Microsystems Philippines, Inc.OPEN SOURCE/STAROFFICE TRAININGVOLUNTEERING CASEby Charmaine Nuguid-Anden11. BackgroundI ntellectual Property Rights violation is rampant in the Philippines, which at best seems to be addressed half-heartedly. The main cause for these IPR violations, particularly for software, is thatlicense fees are generally expensive. Software vendors offer so-called academic editions but the feesfor these are still out of reach of many educational institutions. Public schools already experiencingchallenges in getting school buildings and decent access roads very often have little left to spend forinformation technology expenses. Students therefore rarely have the chance to develop the skillsneeded in the New Economy.One way that the Philippine government addresses this concern is by eliciting the assistance of the privatesector. One such project is the PCs for Public High Schools program, where 1,000 public high schoolsnationwide received 20 new computer units each. This program is complemented with the construction ofcomputer labs, the installation of communications equipment and the use of legitimate software.Another way that the Philippine educational system can overcome the financial constraints of licensedsoftware is through what is known as Open Source technology. Open Source software is software whosesource code is made available to the public and the community at large can introduce enhancements tothe code, thereby allowing the software to evolve to better and better versions. Open Source is a relativelynew concept to most Philippine IT organizations and companies in general but it has been gaining popularityin many countries, particularly in Europe and Asia. Many governments have seen the value of implementingOpen Source as a policy to significantly reduce the financial burden of expensive proprietary software.The most common examples of Open Source software are Linux, which is fast becoming a widely-acceptedalternative to Windows, Java technology, an object-oriented, platform-independent, multi-threaded,programming environment that offers flexible, write-once/run-anywhere development platform andOpenOffice which offers most of the functionalities of Microsoft Office.192

EBCR Philippine Country ReportSun Microsystems, Inc. is one of the proponents of Open Source technology. [Sun develops standards-based, cross-platform software systems and applications.] Open source is an important vehicle for manyof the technologies that go into these systems and applications. Producing open systems has been thehallmark of Sun’s business philosophy since its founding. 2Sun invented Java which is the world’s most popular software development platform. The Java platformprovides freedom of choice through multi-platform compatibility. It’s a highly secure, open, robust, viable,and flexible platform.3Sun also developed a product called StarOffice, which offers an office productivity alternative to MicrosoftOffice. While it is priced at a fraction of Microsoft Office, StarOffice 6.0 is offered for free to educationalinstitutions.4 StarOffice 6.0 is a reference implementation of OpenOffice.org.5 Sun has hundreds of engineersworking on a variety of free and open source projects that benefit the Linux and open source community,such as OpenOffice.org, GNOME.org, Mozilla.org, Jxta.org, and Apache.org. In addition to participating inopen source projects, Sun has contributed perhaps more code than any other commercial vendor to thecommunity. The StarOffice source code contributed through OpenOffice.org remains the largest singleopen source contribution ever.In the Philippines, Sun implements its StarOffice education initiative by providing StarOffice for free topublic and private schools, colleges and universities. This initiative is supported by Sun’s joint-venturecompany, Sun Microsystems Philippines, Inc. (SunPhil).2. About SunPhil2.1 Corporate ProfileSince July 1989, US-based Sun Microsystems, Inc. was represented locally by Philippine Systems Products,Inc. (PSPI), whose management the Mamon family took over in 1992. In July 1999, IT Holdings – managedby the Mamon family – and Sun Microsystems, Inc. formed Sun Microsystems Philippines, Inc. (SunPhil),a joint venture company.6 SunPhil is the first joint venture of Sun Microsystems and was followed bysimilar partnerships in Indonesia and Sri Lanka. SunPhil bagged large and strategic projects such as thefive-year, US$33 million World Bank-funded Philippine Tax Computerization Project with the Bureau ofInternal Revenue. This project is considered as the largest successfully completed IT project in Philippinegovernment. PSPI/SunPhil has enjoyed double digit growth over most of the last decade. Today it employsclose to 100 persons. 193

The “free software” paradigm that is espoused by the Open Source Technology movement is also one of thepillars of SunPhil’s corporate citizenship program.For instance, StarOffice, Sun’s multi-platform office productivity software suite, is given away to schoolsand other educational institutions and individuals. While this software used to be given out for free to thecommunity at large, Sun now charges license fees for use by enterprises, government and individuals.However, StarOffice remains free for the education sector. The company has currently propagated StarOfficeto more than 70 schools nationwide mainly through participation in the government’s PCs for Public HighSchools program, in coordination with PBSP.7The company heavily promotes Java, a platform independent developer tool, and currently the de factoprogramming platform for the Internet. There are currently over 3 million Java developers worldwide andSunPhil sees this as a strategic advantage for the Philippines. Programs such as “Java sa Eskwela” and the“JavaCup” programming competition were employed in order to develop an army of Java developers.8Because of its previous involvement with government, SunPhil representatives also sit in the ITECC(Information Technology and Electronic Commerce Council) as chairpersons for committees related toeducation and government projects.PBSP serves as SunPhil’s partner in the PCs for Public High Schools project and a Teacher Training courseon StarOffice and Linux using volunteers from and recruited by SunPhil. The PCs for Public High Schoolsproject is an extension activity resulting from donations of StarOffice to PBSP’s Computer Labs for PublicSchools. The Teacher Training was conducted by SunPhil’s Business Development team and student volunteersfrom the Junior Philippine Computer Society. Aside from this, SunPhil has led the setting up of JavaCompetency Centers which will serve as vehicles for manpower and industry development and one of thevenues for the “Java sa Eskwela” project. To date there are competency centers in the University of thePhilippines, the Mapua IT Center and the Ateneo de Manila University.92.2 Values and LeadershipSunPhil’s corporate values are exemplified best by the acronym LITE: L -Leadership; I - Integrity; T -Teamwork; E - Excellence.10 The company views its corporate citizenship role as using its sphere of influenceto make things better for the greater number of stakeholders - society, community & country. For LeoQuerubin, the company’s former Business Development Manager, there is no marked difference betweenpersonal and corporate volunteerism because corporate volunteering stems from personal values.Volunteerism in the company is fueled by internal communications. Though the company does not subscribeto the Volunteerism Week and Corporate Community Investment Program of Sun Global, SunPhil uses194

Sun Microsystems Philippines, Inc. Open Source/StarOffice Training Volunteering Caseinternal champions to build buy-in among employees. “Evangelists” or key people in all departmentsprovide “unofficial” pressure for other employees. CSR and volunteerism activities are not considered byemployees as situations of “reward and punishment” but as “rewards later on”. For Leo, the desire to dogood provides the sustainability of the volunteering effort.2.3 StakeholdersSunPhil considers all its target audiences as its stakeholders. These include non-revenue generatingcontacts and resources, and all of SunPhil’s managers are involved in the process. The process bywhich these stakeholders are identified is based on specific goals that the company identified andthe sectors that would most likely be affected. For the Philippines, these goals spring from particularconditions: (1) that Filipinos are IT consumers more than producers; (2) the yawning digital divide interms of IT access; and (3) rampant software piracy. The company believes that these negatives shouldbe turned into positives.Leo cited, for example, that public schools with marginal budgets are being “forced” to piracy due tothe high cost of software licenses, ergo the company must package software that schools can uselegitimately.The perception that stakeholders have of the company is important as it feedbacks to how SunPhil addressesidentified core problems. The company looks at the valid concerns of its stakeholders, which have beenidentified, such as issues that the software is not a “standard” office productivity tool and about it being“free”. SunPhil’s aggressive promotion of the concept of Open Source technology addresses the impressionby donees that are not computer literate that a free product is not good.3. SunPhil Volunteerism in Practice3.1 PracticeSunPhil President Cynthia Mamon believes that her CEO is Jesus Christ and as such she should reflect thattype of leadership in the company. This is also reflected in the way most of the managers conduct theirbusiness. She stresses that service remains a key element in the leadership style and the company culture.“My management style is based on a very firm belief that my real boss, my real CEO is Jesus. I am inspiredby the book, Jesus CEO and so based on that, and based on my strong spirituality, I do believe that, as aleader, I am not only expected to achieve profits and sales targets, but also to take care of my peopleespecially their souls. So, I believe there is a call for spiritual leadership in corporate leaders like me. That’ssomething that is maybe not common, but I am that.” 195

There is currently no written policy for CSR. The company’s vision serves as the backbone of both itscommercial and social ventures. The Business Development team acts as the unit in charge of non-revenue projects (CSR) and nation-building initiatives and is answerable directly to Cynthia Mamon. Thisteam used to be composed only of Leo and one staff. Since then the team has been merged with Marketingto form the Business Development and Corporate Marketing Group.There are clear program designs especially for those activities that are not fully considered as CSR, such asthe JAVA Competency Program. The company is targeting at least 10,000 certified developers in five years.The business case for this thrust is that it will eventually aid the company’s plan to create a community ofhigh-quality software development companies in the Philippines that will allow the country to be a netexporter of IT products and services rather than a net importer. SunPhil implements this program incoordination with its counterparts in other parts of Asia to form a Java Ring that comprises the ASEANJava Competency Program.11Because of the small manpower that the company can channel to CSR, SunPhil networks with otherorganizations, like PBSP, to increase its bandwidth and make the most productive use of human resourcesit may not have within. The Business Development head volunteers time with the ITECC and with theMakati ICT Council. SunPhil paid for the training of student volunteers (members of the Junior PhilippineComputer Society), which PBSP co-manages, to supplement the volunteer time that Business Developmentdevotes.There are no formal implementation systems for its CSR activities, except for the JAVA Competency Program,so much so that SunPhil relies on its partners to provide the design and groundwork for implementation.The company is interested in further integrating CSR in its daily life, possibly including a CSR talk in itsmonthly staff meetings. Systems are in place to measure costs of CSR activities, and benefits are alsomeasured in a quantitative manner. Communications are mainly ad hoc, with reliance solely on the“Evangelist” system for “volunteer” work, while more formal systems are created for the JAVA CompetencyProgram. Because these activities are included in the KRAs of the Business Development team, there areaccounting procedures and reporting systems in place. CSR activities and results are announced to employeesmainly through monthly staff meetings but regular, frequent feedback is given to the president. TheSunPhil president herself is very much involved in various CSR endeavors most notably as head of the HRfor e-Commerce Committee of the Philippines-US Business Council and as a founding member of OutsourcePhilippines.196

Sun Microsystems Philippines, Inc. Open Source/StarOffice Training Volunteering Case3.2 Feedback from the CommunityTeacher Training for StarOffice & Linux programs conducted by volunteers from SunPhil and the JuniorPhilippine Computer Society benefited the teachers of two public schools. Both teachers compared thetraining course with those of SunPhil’s competitors and the feedback was that there weren’t enoughsessions and review materials. Some beneficiaries were aware that they were being trained by employeeand student volunteers, and mixed reactions were given.Much work needs to be done on follow-on activities after the initial training. Though all the beneficiariesfelt valued for being chosen by the company, perhaps due to the limited bandwidth of SunPhil for CSRactivities there wasn’t enough follow-up of the training. Some of the training beneficiaries expressedconcern about the use of student volunteers to implement the program.3.3 Impact AnalysisRating perceived vs. actual benefits of “voluntary” CSR, SunPhil benchmarked the impacts on key businessareas. SunPhil gained the most through the replication of its projects by its competitors and in its corporatereputation. Following closely are gains in decreased/managed risk, reaching untargeted stakeholders,sustained build-up of social capital and promotion of public good. Some aspects of core business hadbetter impact than most, such as advertising, which is mostly word of mouth, and corporate planning &issues management. In terms of marketing advantage (product patronage and brand equity) there wasminimal gain, while elements of core business strategy were affected as expected (decision-making processes,business solutions and staff & line management functions).“Gains” reflect that actual impact was better than expected. Losses are when the perceived impact wasbetter than what was actually obtained.Despite the “gains” the company obtained, SunPhil maintains that these activities are still done within thespirit of volunteerism because of the strong personal internalization of employees involved. Leo believesthe volunteerism stems from the individual and that the company’s role is to provide the policies andlogistics to support this. He stresses that IT is a tool for development and as such people should treat itthat way to solve social problems. He believes that all companies can use IT to enhance society, especiallyif the company has a services orientation. 197

4. Cracking the CodeIn principle, SunPhil has a strong foundation for its CSR in the IT industry - Open Source. The companybelieves in fair price for fair use, and refuses to indulge in predatory pricing for its products and services.Since Open Source in practice is virtually free, the company believes that it is partially solving the problemof piracy.While Sun Worldwide does not see itself as a purely Open Source company nor does it espouse OpenSource as the solution in all cases, it believes that users should be given a choice. Such a choice isparticularly relevant when the community being served cannot afford expensive proprietary solutions andresorts to piracy to meet its IT requirements.At present, SunPhil’s CSR strongly relies on its donations of software and its focus on Java training. Themain weakness of its nearly two-year old volunteering effort is the delivery system for standardizing“StarOffice” as well as in support activities like training documentation. Resignations of members of theBusiness Development team initially cast doubts on the sustainability of the company’s volunteeringactivities, but SunPhil has since put CSR under a new integrated group called Business Development andCorporate Marketing.SunPhil is also one of the founding members of Open Minds, a Philippine-based non-profit umbrellaorganization that aims to develop the Open Source industry in the country and build the necessaryinfrastructure to support it. SunPhil donates employee time and resources to the organization with theend in view of creating a multiplier effect once the required structures are put in place.The company’s strategy of employing external implementers for its volunteering is a way to complementmeager human resources, but even in this area more support should be given particularly in the extension/training aspect. PBSP became a partner in the training module development, particularly in managing thedevelopment of student volunteers. The training of student volunteers allowed SunPhil to fulfill its goal ofspreading their technologies’ user base, but the company must still provide the contextual backgroundwhy StarOffice and Linux are relevant to regular public high schools. Employees should be present duringtraining; especially since the trainees perceive that it is not the role of student volunteers to promote thecompany or its ideals.Volunteering has only been a nearly two-year program and there is room for improvement for SunPhil.Given the interest that the earlier volunteering efforts has sparked, the company can work quickly inputting more support systems in place (for example through more employee volunteers, training manualsfor novices, etc.) so that the momentum is not lost. It can also tap the resources of its more experiencedpartners to ensure a consistent quality of delivery. Then it will not just be about walking the talk but aboutwalking with a steady pace.198

Sun Microsystems Philippines, Inc. Open Source/StarOffice Training Volunteering CaseReferences1 National UNV - BCR Specialist.2 Sun’s Position on Open Source Technology (http://www.sun.com/aboutsun/policy/opensource.html and http://www.sunsource.net/why.html)3 About Java (http://wwws.sun.com/software/java/)4 StarOffice 6.0 is free for educational institutions (http://wwws.sun.com/software/star/staroffice/6.0/ index.html )5 OpenOffice.org (http://www.openoffice.org/)6 Sun Microsystems Philippines Corporate Brochure, 20037 Sun donates to PCs for Public High Schools Program (http://www.itnetcentral.com/article.asp?id=1072)8 Java sa Eskwela (http://www.itnetcentral.com/article.asp?id=1047)9 AJCP in UP, Mapua and Ateneo (http://itmatters.com.ph/news/news_11302001i.html)10 SunPhil Vision and Mission, 200311 About the AJCP (http://ph.sun.com/ajcp/index.html)Resource PersonsMs. Ito Gruet, Head, Business Development and Corporate Marketing GroupMr. Leo Querubin, former Business Development Manager 199

Unilever/DTI: Growing CucumbersA CASE STUDY ON UNILEVER AND DTIby Charmaine Nuguid-Anden11. IntroductionM ang (Mister) Ramon gazed at the vast expanse of field, the baking sunlight clearly showing the large number of workers busily crunched low. “If not for the opportunity given by CMC(California Manufacturing Corp.), I wouldn’t have been able to help my neighbors. If not for DTI(Department of Trade and Industry), I won’t be able to continue helping my neighbors.”Ramon is one of four major “integrator” farmers in Guimba, a municipality reputed to be the CucumberCapital of the country. Acting as community leader, he is go-between for a multitude of landless farmersand anyone big – whether that is business or government. Ramon’s casual remark indicates the dynamicof the relationship between this community and the latter parties. Community enterprise via contractgrowing is not new and it has proven to be one of the most viable options for companies to be involvedwith communities. But given the changes that globalization is making in the way companies sourcematerials, how far can companies attempt to combine their social responsibilities with business? If acompany runs, can government be an adequate wall to lean on?2. The Cucumber CapitalGuimba is a municipality within the province of Nueva Ecija, about 4 hours away from Metro Manila. Thebarangay2 of Caballero in Guimba began planting cucumber in 1986 and supplied these fresh to foodmanufacturing companies in Metro Manila. In 1999, after much assistance from the local governmentand from particular companies, Guimba was identified as a participant to the DRIVE project of DTI. DevelopingRural Industries and Village Enterprises (DRIVE) was a flagship project of then President Estrada, mainlyemploying a Business-to-Business (i.e., mentoring) approach towards community development. The DRIVEprogram supported small businesses in the areas of marketing, production, financing and human resourcedevelopment. These interventions were conducted at the local level by DTI with various partner agencies.200

EBCR Philippine Country ReportThe DRIVE program, or Developing Rural Identified “mentors” were California ManufacturingIndustries and Village Enterprises began in Corp. (CMC) and RamFoods. CMC was a foods1998 and tapped large companies to source multinational, known locally as a producer of thetheir requirements from local communities brands Knorr, Best Foods and Lady’s Choice. In 2000,thereby “developing the domestic, industrial Unilever fully acquired CMC, further expanding itsbase and opening up opportunities for SMEs industrial base. Unilever is one of the largest consumerin the provinces.” Community enterprises businesses in the world, ranking 54 th in Fortuneand industries were identified by local DTI Magazine in 1999 based on global sales. RamFoods isoffices and LGUs. a small, wholly Filipino-owned food manufacturing company owned by AceFoods Holding Company andOriginally a Presidential program with the specializes in products such as cooking oil, pickles,Department of Trade & Industry’s Office of and mayonnaise.Special Concerns (DTI-OSC) acting asSecretariat, at the change of administration,the project was re-assigned to the Regional 3. Where it all beganOperations Group (ROG) of the DTI. TheDRIVE was organized under a National Under the DRIVE program, Guimba became eligible forCommittee headed by DTI and was also marketing and financial assistance from governmentsupported within by a Technical Committee. agencies. According to CMC, Mr. Palomo had beenThe Secretariat was mainly composed of the supplying cucumbers through a contract growingDTI OSC, DTI ROG and the Bureau of Small arrangement since the late 1970’s when he was still& Medium Business Development (BSMBD). located in another province. Mr. Palomo corroborated the statement, adding that he helped bring cucumberBased on the DRIVE Program, rural to Guimba around 1986 when he married and settledindustries were composed of a distinct in the area.group of similar enterprises engaged in thesame or related lines of economic activity. DTI identified the community as OBOP (One BaranggayIt also covered a cluster of municipalities One Product) project when the program was launchedwithin a distinct geographical area where in the region in 1994. In 1995, the DTI-Comprehensiveprocessing activities were anchored to Agrarian Reform Program (CARP) assisted contractincrease value added to readily available growers by providing a soft loan of PhP 100,000 (US$materials in the area. A village enterprise 3,571.43)3 for the construction of common serviceis a small or micro-based business with facility ‘pickling’ tanks. Those who availed were thecapitalization of up to PhP 15 million bigger landed integrator farmers (i.e., those with lands(US$300,000 based on 2000 foreign that are more than 2 has).exchange rate). 201

The total land area devoted to cucumber farming amounted to 80 hectares, about 24 hectares ofwhich belonged to four land owners or the integrators: Mr. Palomo and his brother Alipio, Mrs.Miguel and Mr. Garcia. The majority of landless farmers rented out land for approximately PhP 5,000a hectare (approx. US$ 1424 based on 1997 foreign exchange rate) from other landowners, who alsoderived profit from a percentage of harvest earnings. In general these farmers, through the integrators,supply fresh cucumbers to CMC, Ramfoods and Kraft Philippines based on purchase orders (PO) givenat the start of the planting season.However, according to Mr. Palomo, CMC taught the pickling5 process to the Palomos and Miguelaround 1997, thus starting a wave of value-added thinking within the community.According to Raul Pagcaliwagan, Procurement Manager for CMC, partially in line with its global thrust tostreamline its operations, the former management broached the idea that the farmers start pickling theirfresh produce. CMC had been providing primary assistance to the community in terms of technicalassistance and cash advances from the POs going as high as 40% of contract price (about a high of PhP 1million for 200 million tons) for the construction of pickling tanks. Provision of access to imported saltfrom India was a key input by CMC to the pickling process as locally available salt was not “clean”enough6.Community assistance included technical training on growing, harvesting, and the total pickling process.The company also provided general management practice training to enhance entrepreneurship skills.Mostly the quality control and purchasing staff interact with the farmers. Weekly monitoring of thefarming and pickling activities also included updates of what was happening in the company, includingnews of the impact of globalization. This relationship between CMC and the Palomo brothers and Mrs.Miguel became the basis for the identification of Guimba as a DRIVE project.4. Government AssistanceAccording to then Provincial Director Judith Angeles, the DTI Nueva Ecija (DTI NE) identified industries tobe included in the DRIVE based on alignment with provincial goals for agro-industrial development andthe region’s investment priority plans. A multi-agency, joint private-public sector committee was organizedto ensure the effectiveness of the local DRIVE program, which was locally taken by the existing SMEDevelopment Council (SMEDC). The program implementing structure was loosely based on the recommendedorganizational framework of the DRIVE National Committee to include the local chamber of commerceand banker’s association.202

Case Study: DTI/Unilever: Growing Cucumbers Roles and functions of participating agencies in the DRIVE Committee Members Functions Central Luzon State Education, research & extension assistance to beneficiaries University Dept. of Agrarian Land distribution – grouping of agrarian reform community beneficiaries, Reform(IMAP) (marketing assistance) Development Bank Developmental finance (regular and special window, “Damayang of the Philippines Pangkabuhayan” or Livelihood Assistance ) for beneficiaries Dept. of Environment & Technical assistance on establishment of Environmental Mgmt. Systems for Natural Resources beneficiary communities Technology, Livelihood & Counterpart of TLRC, assists in provision of access to alternative technology Devt. Center and local market fairs DTI Provides beneficiaries access to trade fairs (regional & national), marketing (particularly products that the companies did not buy)The DRIVE Committee acted as a central decision making hub for all the DRIVE projects in the province.Community needs were assessed by the DTI NE through ocular inspections and community requests,which were matched with the available resources from the participating agencies.Based on DRIVE intervention areas in human resource, market, production and financial assistance, theDTI NE provided various community support activities, the most important of which was the formation ofthe Guimba Cucumber Development Foundation. According to DTI NE, the Cooperative DevelopmentAuthority (CDA) discouraged the organization of many cooperatives in one small area. DTI, in turn, wantedthe integrators and growers with landholdings to be organized and have their organization acquire a legalpersonality to facilitate technical and financial assistance from various sources.Headed by Ramon Palomo, the Foundation allows the community to be eligible for loans from commercialbanks. The Foundation became a conduit of assistance to landless farmers, as most have become employedby the Foundation instead of having to rent out land from other landowners. The Foundation also providedsocial assistance such as in health and education. 203

Interventions by the DRIVE Type of Intervention Specification Marketing Subcontracting – A assembler-supplier matching arrangements, preparation of promotional brochure and promotional billboard, market linkages with Lagare Cabanatuan City, Cucumber Festival in December 1998 Production Product Packaging, Pickle processing, financial management, preventive maintenance seminar Financing Regular DBP Business loan (PhP 1.7 million at 12% interest rate for 6 months), total loans amounting to PhP 3.2 million Human Resource Formation of Guimba Cucumber Development Foundation Development5. Initial Results of the EngagementOn average, the community supplies about 200 MT of pickled cucumbers to CMC, as well as substantialfresh produce for other companies like RamFoods and Kraft Philippines. Earnings from 1997 to 1999ranged from PhP 45 million to PhP 55 million, dipping in 1999 to PhP 50 million due to downturn in theeconomy and decreasing requirements from companies. Incomes on a per farmer basis went up from PhP5,000-10,000 from traditional farming (rice) to PhP 25,000-40,000, and affected approximately 3,200persons. With about Php 50-75 million total investments from the farmers and various investors (mostlyCMC), there are now 112 pickling tanks all over the community each with a capacity of 1.5-1.6 MT. Withthese efforts and results, the Guimba Cucumber Development project became one of the nominees forBest DRIVE project.6. Current ChallengesYet despite these apparent successes, the relationship is fraught with challenges that seem beyond thecontrol of all the players. Globalization surfaced India as a potential cost competitor of Guimba asUnilever’s regional producer of pickling cucumbers. Within this context, CMC admits that it has becomea challenge to justify the PhP 6 million (US$ 120,000) additional sourcing cost in order to be “locallysocially responsible”. Other companies agree that the threat of cheap imports could seriously hamper thelocal pickle industry – which essentially sources nearly 80% of its raw material from this one community.DTI NE further explains that when tariff barriers will be totally dismantled under globalization, it is expectedthat multinationals will anchor their business decisions primarily on economics and not so much on socialresponsibilities. It is in this context that growers and integrators are encouraged to start processing theirproducts and scout for other markets while continued government assistance is assured by DTI.204

Case Study: DTI/Unilever: Growing CucumbersDTI NE has stimulated local marketing and development of pickled products. Currently, there is nointeraction between the government and the companies involved, as the DRIVE actors were focusingtheir assistance towards the creation or identification of new markets for the community’s pickledcucumbers. Only Ramon seems to be optimistic that the outcome could still be positive.7. The Issues7.1 AdvocacyThe community and government recognize the strong positive influence of CMC in the area, with RamFoodsacknowledging the leadership position of CMC in local social upliftment. Based on RamFoods experience,cucumber became an alternative crop to rice which yield lower returns. According to CMC agronomists,Guimba’s land texture (sandy loam) is more suitable in growing cucumber as compared to other areas inthe province (i.e., cucumber needs less water than rice so irrigation is not a problem. While there is aninsurgency problem in some areas of the Nueva Ecija province, Ramon said that their area is relativelypeaceful. That there are no NPAs (rebel group) there; vices and crimes are virtually non-existent becausethe people are so busy and pre-occupied with their livelihood activities.As the bedrock of the cucumber industry in the country, the market position of CMC cannot be easilyreplaced. This was made clear as one of CMC’s advocacy standpoints with its owner, Unilever. Unilever’scurrent sourcing practice rests on the identification of “global” and “regional” materials which it sourcesfrom specific countries only. This means that any local sourcing will have to be reviewed regionally, withthe local affiliate having to guarantee that the local prices are cheaper than the regional by at least 10%in order to be considered. As Unilever had not yet officially identified cucumber as a “global” material,CMC still has leeway to arrange its sourcing mix. Despite the large savings that can be obtained from India, CMC stated that it would not disengage whollyfrom the Guimba community because of: (1) social obligation to farmers; and (2) environmental factorswhich can affect the supply of agriculture crops from abroad. Though originally borne out of necessity(purely business motive), the social dimension of the relationship grew over the years and is now somethingthat the company cannot ignore. Raul mentioned that the CMC is thinking of possibly further streamliningtheir pickle relish operations process, which could actually be an opportunity for the Guimba community.As a “priority” government project, there is a lot of networking and advocacy that needs to be improved onthe side of government. CMC was not even aware that Guimba had been identified as a key industry areaby government during the last five years. Upon learning that the community received loans from the DBP 205

because of the DRIVE, CMC thought that the amounts made available were meager compared to thesize of the investment that they and the farmers had sunk in.During the earlier part of the relationship this seemed to make sense – the company did not seem to haveany problems with the community and vice versa. The government only acted on the problem areasidentified by the community. Yet according to Jika Dalupan, Senior Corporate Relations Manager of Unilever,they were always willing to partner with government and communities, especially in the sourcing of rawmaterials as an expression of their social responsibility. She opines that DRIVE was simply not well knownand because of that possible synergies in community assistance were not seen by any party.The possible pullout of CMC and the danger brought by cheap imports has changed this context. Particularly,DTI NE could be in a position to assist CMC in strengthening its CSR position to stay in the Guimbacommunity by working together on R&D, financing and organizational development for the community.7.2 EfficacyThere is a sense that relations between CMC and Guimba were already amicable long before governmentcame into the picture. Though the relationship with other companies was purely business, the farmerintegrators were open with CMC personnel. However CMC’s (and the other companies) points of referencewere these integrators – they did not deal directly with the rest of the community. What the governmentindirectly did was seal the gap between the companies and the rest of the community through the formationof the foundation. As a result, the DRIVE targets of raised incomes and increased standard of living inGuimba were accomplished.However, it is apparent that premises made by local government about the market and about CMC need tobe reviewed. The DTI NE uses basic methodologies to ascertain community needs such as ocular inspections,provincial industry strategic planning, and SWOT analysis. Planning matrices were also used to identifysynergies of action with individual agency mandates, such as R & D for Central Luzon State University(CLSU). Despite the presence of the local chamber of commerce, there is clearly not enough private sectorparticipation in the committee itself. Though there are regular meetings, there are no formal processreview mechanisms used to identify areas of improvement in service delivery or planning.For example, the current move for farmers to become pickle producers themselves may not be the mostcompetitive option as the threat of cheaper imports may result in high community losses. In this area,facilitated interaction with companies may reveal areas of new market collaboration that the governmentmay not have seen (after all that’s what where companies are good at).206

Case Study: DTI/Unilever: Growing Cucumbers7.3 Capacity BuildingThe DRIVE was able to complement CMC’s initial community assistance through formal communityorganizing of farmers which became the conduit for much needed financial, technical and marketingassistance. The contract growing arrangement became a venue not only for more landless farmers toincrease their income, but also for the build-up of social capital in terms of increased capability of farmersto relate to large entities like CMC and government via organizations.Of all the buyers, CMC was the only company with stringent conditions (i.e., use of Indian iodized salt,sizing of harvested cucumbers, total pickling process, quality control during planting, harvesting andsorting, company deduction of 1% tax from contract price for payment to the government, attendance toGood Manufacturing Practice training, etc.) regarding the product and the process for both fresh andfermented cucumbers. Though their quality inspection teams came around, Ramfoods and Kraft merelybuy from the community.CMC assisted the community in the pickling learning process as well as provided technical assistance andquality control on a weekly basis which the community liked because they were being taught how to addvalue to their crop. Most interestingly, farmers were taught to conduct their business in a more professionalmanner. As a part of their supply chain, farmers were not spared from company policies which includedobservance of social responsibility and strict regulations. CMC explained to the farmers that staying inbusiness meant striving to be globally competitive, as evidenced by CMC’s buyout by Unilever. They weremade to understand that due to lowered tariffs, Unilever began sourcing half of its needs from India.7.4 SustainabilityOne option that Mr. Palomo and the other farmers aspire for is to build their “own corporation”, using thelearnings from the pickling process as their step towards creating more value-added. They have conductedexperiments with pickling, with results comparable to the products of buyers, but Ramon says they stillneed further skills in networking, packaging and promotion which DTI could possibly provide assistance in.This development has proven fortunate as the company was toying with the idea of outsourcing thisprocess. One of the integrators has also become a supplier of another material to CMC, and therefore,opened up the opportunity for the rest of the community in this material. 207

7.5 Other IssuesPickling naturally results in highly salinized water, which presently were thrown into the ground. Therehave been recent complaints of wastewater disposal highlighted by an independent NGO (“LakasMagsasaka” or Farmers’ Force) in the area. The community had mixed reactions to this development,as most farmers do not note any negative effects on the crops. Mr. Miguel is a trained agronomistand based on observations over 3 years, he stressed that there were no negative effects. This hasbeen raised to the government agencies assisting the community and impacts are under furtherstudy.8. In the FutureThe relationships between the Guimba community and the various companies operate a good deal on itsown, with government acting as a silent partner of the community only. Nonetheless, the government hasidentified the gaps that need to be addressed and focused its efforts based on networking with thegrowers over the years. Community Corporations GovernmentFor local government implementers, the existent judgment against the commercial sustainability ofcommunity enterprises involuntarily creates a dependency on government that could undermine theircommunity development work. There is little coordination between the businesses themselves, thus showingthat there is a gap between the companies and communities that government could actually do somethingabout (i.e., strategic financing). Addressing this situation of asymmetric information could allow thegovernment to design better incentives packages for further assistance to the community.As far as community enterprise development goes, the key element is really the existence of a businessimperative for both bigger business and the community. In this sense, the community had become successfulbecause the farmers themselves recognize the business imperative and acted accordingly. This is theessence of community empowerment and partnership. In the meantime, Mang Ramon is still waiting forhis cellphone to ring for the next order.208

Case Study: DTI/Unilever: Growing CucumbersEndnotes1 National UNV - BCR Specialist.2 As the basic political unit, the barangay serves as the primary planning and implementing unit ofgovernment policies, plans, programs, projects, and activities in the community (Local Government Codeof 1991 or Republic Act No. 7160).3 US$1=Php28; 1995-1996 foreign exchange rate.4 Ibid.5 Pickling is a fermentation process, which converts the sugar in cucumbers to lactic acid, which acts asthe primary agent in preserving the cucumber through the action of lactic acid bacteria in a saltsolution.6 Indian salt has a high salometer reading – in layman’s terms, it’s saltier. 209

Copyright 2003 by Philippine Business for Social Progress, United Nations Volunteers and New Academy of BusinessAll rights reserved. No portion of this document may be excerpted, reproduced, or copied without the permission of the publisher.ISBN 9718572-44-9Philippine Business for Social ProgressPSDC Bldg., Magallanes cor Real Sts, Intramuros 1002, Manila, PhilippinesTelephone Nos.: (632) 527-7741 to 51; 527-3747/48Fax Nos.: (632) 527-3740/43/47Web: http://www.pbsp.org.phEmail: pbsp@pbsp.org.phUnited Nations Volunteers2/F NEDA sa Makati Bldg.,106 Amorsolo St., Legaspi Village1229 Makati City, PhilippinesTel. no.: (632) 892-0611 loc. 248Telefax no.: (632) 812-8657Web: www.unv.orgEmail: beatriz.fernandez@undp.orgNew Academy of BusinessCarpenter House Innovation CentreBroad QuayBath, BA1 1UDUnited KingdomTel no.: +44 (0)1225 388648Fax no.: +44 (0)1225 388638Web: www.new-academy.ac.ukEmail: david.murphy@new-academy.ac.uk rupesh.shah@new-academy.ac.uk 210

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