Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS:
First Regular Session

COMMITTEE REPORT NO. $03

the COMMITTEE ON TRADE AND INDUSTRY on

Re : House Bill No. 4575
Recommending its approval in substitution of House Bill No. 1224

Sponsors : Representatives Albert Raymond S, Garcia, Diosdado Macapagal
Arroyo and Gloria Macapagal-Arroyo

SSS
Mr. Speaker:

The Committee on Trade and Industry to which was referred House Bill No. 1224.
introduced by Representatives Macapagal Arroyo D., Macapagal-Amoyo G..
Macapagal Arroyo J.M., Castelo, and Herrera-Dy, entitled:

“AN ACT
INSTITUTIONALIZING CORPORATE SOCIAL
RESPONSILIBILITY, PROVIDING INCENTIVES THEREFOR
AND FOR OTHER PURPOSES”

has considered the same and recommends that the attached House Rill No.

45.75 entitled:

“AN ACT
INSTITUTIONALIZING CORPORATE SOCIAL
RESPONSILIBILITY, PROVIDING INCENTIVES THEREFOR
AND FOR OTHER PURPOSES”

be approved in substitution of House Bill No. 1224, with Representatives Macapagal
Arroyo D., Macapagal-Arroyo G., Macapagal Arroyo J.M., Castelo, Herrera-Dy.
Garcia A.R., Apacible, Duavit, Biron, Defensor, Alvarez A., Trevias, Casifo.
Villarica, Mandanus, Femandez, Garay, Teodoro, De! Rosario A.R., Sacdalan.
Osmefia, Joson, Rodriguez 1., Lacson-Noel, Yu, Ferrer J., Sahidulla, Lagdameo A..
Bonoan-David, Mellana, Sakaluran, Quisumbing, Unabia, Batocabe, Colmenares.
Haresco, Villar, Pancho, Enverga, Cojuangco E., Cajayon, Rodriguez R., Tugna, Ty.
Romualdez, Gonzales A.. Panotes, and Bagasina as authors thereof.

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Respectfully Submitted:

GARCIA
itiee on Trade and Industry

‘THE HONORABLE SPEAKER
HOUSE OF REPRESENTATIVES


FACT SHEET
House Biric; 4575

(In substitution of HB No.1224)

AN ACT ENCOURAGING CORPORATE SOCIAL
RESPONSIBILITY, PROVIDING INCENTIVES THEREFOR, AND
FOR OTHER PURPOSES,

introduced by: REPS. DIOSDADO MACAPAGAL ARROYO, GLORIA
MACAPAGAL-ARROYO, JUAN MIGUEL MACAPAGAL ARROYO,
WINSTON CASTELO and BERNADETTE HERRERA-DY

Committee Referral: COMMITTEE ON TRADE AND INDUSTRY (Primary)
Committee Chairperson: REP. ALBERT RAYMOND S. GARCIA

OBJECTIVES:

* To foster sustainable economic development and environmental protection by
encouraging corporate social responsibility (CSR) in business organizations,
whether single proprietorship, partnership or corporation.

KEY PROVISIONS:

+ All business organizations established and operating under Philippine laws,
whether domestic or foreign, are hereby encouraged to observe CSR defined
herein as the commitment of business to contribute an a voluntary basis, to
sustainable economic development by working with relevant stakeholders to
improve their lives in ways that are good for business, sustainable
development agenda and society at large.

* CSR-related activities shall include, but not limited to, charitable programs
and projects; scientific research; youth and sports development, cultural and
educational promotion; services to veterans and senior citzens; social
welfare; environmental sustainability, health development; and disaster relief
assistance; and employee and worker related CSR activities.

+ To encourage companies to engage in CSR, Section 43 of Balas Pambansa
Big. 68, otherwise known as the “Corporation Code of the Philippines” is
hereby amended to read as follows:

“Sec, 43 Power to declare dividends. -

KOK OK


Stock corporations are prohibited from retaining surplus profits in excess of
one hundred (100%) percent of their paid-in capital stock, except: (1) when
justified by definite corporate expansion OR CORPORATE SOCIAL
RESPONSIBILITY projects and programs approved by the board of
directors; or (2) when the corporation is prohibited under any loan
agreement with any financial institubon or creditor, whether local or foreign,
from declaring dividends without itshis consent, and such consent has not yet
been secured, or (3) when it can clearly show that such retention is
necessary under special circumstances obtaining in the corporation, such as
when there is need for special reserve for probable contingencies.”

Full Deductibility from Gross Income. - Nothing herein shall be deemed to
‘amend or modify Section 34 (H) of Republic Act No. 8424 otherwise known as
the “Tax Reform Act of 1997" relative to the full deductibility of contributions or
gifts actually paid or made to accredited donee institutions in computing
taxable income which shal} continue to be in force and effect.

The State, through the Department of Trade and industry, shall give national
recognition and awards to business establishments for outstanding, innovative
and world-class CSR-related services, projects and programs. It shall likewise
extend endorsements and encouragement to domestic and foreign
corporations doing business in the Philippines who are candidates for
recognition in intemational award-giving bodies for their CSR-related activities

Alt locai government units shall extend whatever assistance is necessary for
business establishments in the exercise of CSR in their areas of jurisdiction.

The Secretary of Finance shall, in coordination with the Department of Trade
and industry and Securities and Exchange Commission shall promuigate
tules and regulations of this Act

RELATED LAWS:

Section 43 of Batas Pambansa Big. 68 is hereby amended

Section 34 (h} of Republic Act No. 8424


Republic of the Philippines
HOUSE OF REPRESENTATIVES
QUEZON CITY

FIFTEENTH CONGRESS
First Regular Session

HOUSE BILL No. 4575
substitution of House Bill No. 1234)

Introduced by Representatives Diosdado M. Arroyo, Gloria Macapagal-
Arroyo, Juan Miguel Macapagal Arroyo, Winston T. Castelo,
Bernadette R. Herrera-Dy, Albert Raymond S. Garcia, Tomas
V. Apacible, Joel Roy R. Duavit, Ferjenel G. Biron, Arthur R.
Defensor, Jr., Antonio C. Alvarez, Jerry P. Treiias, Teodoro A.
Casino, Linaville Ruth R. Villarica, Hermilando I. Mandanas,
Danilo Ramon S. Fernandez, Florencio C. Garay, Marcelino R.
Teodoro, Antonio Rafael G. Del Rosario, Jesus N. Sacdalan,
Tomas R. Osmeiia, Josefina M. Joson, Isidro S. Rodriguez, Jr.,
Josephine Veronique Lacson-Noel, Victor J. Yu, Jeffrey P.
Ferrer, Nur-Ana I. Sahidulla, Antonio F. Lagdameo Jr., Ma.
Theresa B. Bonoan-David, Evelyn P. Mellana, Raden C.
Sakaluran, Gabriel L-R. Quisumbing, Peter M. Unabia, Rodel
M. Batocabe, Neri J. Colmenares, Teodorico T. Haresco, Jr.,
Mark M. Villar, Pedro M. Pancho, Wilfrido Mark M. Enverga,
Enrique M. Cojuangco, Mary Mitzi L. Cajayon, Rufus B.
Rodriguez, Sherwin N.Tugna, Amel U. Ty, Ferdinand Martin
G. Romualdez, Aurelio D. Gonzales, Jr., Elmer E. Panotes,
Catalina C. Bagasina

——..

AN ACT
ENCOURAGING CORPORATE SOCIAL RESPONSIBILITY,
PROVIDING INCENTIVES THEREFOR, AND FOR OTHER
PURPOSES,

Be it enacted by the Senate and House of Representatives of the Philippines
in Congress assembled:


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SECTION 1. Short Title, - This Act shall be known as the
“Corporate Social Responsibility Act of 2011.”

SEC. 2. Declaration of Policy. — The State recognizes the vital
role of the private sector in nation building and shall encourage its active
participetion in fostering sustainable economic development and
environment protection in the Philippines. Towards this end, the
government shall mobilize its various agencies, in coordination with non-
government and people’s organizations, to work hand in hand for the
integration, promotion and strengthening of corporate social responsibility in
all business organizations.

SEC. 3. Corporate Social Responsibility, ~ All business
organizations established and operating under Philippine laws, whether
domestic or foreign, are hereby encouraged to observe corporate social
responsibility (CSR) in the operation of their business in the country.

For purposes of this Act, corporate social responsibility refers to the
commitment of business to contribute on a voluntary basis to sustainable
economic development by working with relevant stakeholders to improve
their lives in ways that are good for business, sustainable development
agenda and society at large. CSR-related activities shall include, but not be

limited to, the following:


1 a) Charitable programs and projects;

2 b) Scientific research;

3 ¢) Youth and sports development;

4 d) Cultural or educational promotion;

5 e) Services to veterans and senior citizens;

6 f) Social welfare;

7 g) Environmental sustainability;

8 h) Health development;

9 i) Disaster relief and assistance. and
10 5) Employee and worker welfare related CSR activities
1 SEC. 4. Deduction from Unrestricted Retained Earnings. - To

12 encourage companies to engage in CSR, Section 43 of Batas Pambansa Blg.
13. 68, otherwise known as the “Corporation Code of the Philippines” is hereby

14 amended to read as follows:

5 “Sec. 43 Power to declare dividends, -
6 XXX XXX XK

v Stock corporations are prohibited from retaining surplus profits in
8 excess of one hundred (100%) percent of their paid-in capital stock,
3 except: (1) when justified by definite corporate expansion OR

20 CORPORATE SOCIAL RESPONSIBILITY projects and


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programs approved by the board —off directors; or (2) when the
corporation is prohibited under any loan agreement with any financial
institution or creditor, whether local or foreign, from declaring
dividends without its/his consent, and such consent has not yet been
secured; or (3) when it can clearly show that such retention is
necessary under special circumstances obtaining in the corporation,
such as when there is need for special reserve for probable
contingencies.”

SEC.5. Full Deductibility from Gross Income. - Nothing herein
shall be deemed to amend or modify Section 34 (H) of Republic Act No.
$424 otherwise known as the “Tax Reform Act of 1997” relative to the full
deductibility of contributions or gifts actually paid or made to accredited
donee institutions in computing taxable income which shall continue to be in
force and effect.

SEC. 6. Awards and Recognition. — The State, through the
Department of Trade and Industry, shall give national recognition and
rewards to all business organizations for outstanding, innovative and world-
class CSR-related services, projects and programs. It shall likewise endorse
for recognition of international award-giving bodies, deserving domestic and

foreign-registered corporations doing business in the Philippines who are


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being considered for their outstanding contributions to socio economic
development.

SEC. 7. Local Government Units. - All local government units
shall extend whatever assistance is necessary for business organizations to
perform their CSR-related activities.

SEC.8. Periodic Report. — All business organizations shall
submit the list of their CSR activities as part of their annual or regular report
to the Securities and Exchange Commission, the Department of Trade and
Industry, or the Department of Finance, as the case may be.

SEC.9. Implementing Rules and Regulations, - The Department
of Finance shall, in coordination with the Department of Trade and Industry
and Securities and Exchange Commission, promulgate rules and regulations
for the effective implementation of this Act within one hundred twenty (120)
days upon its effectivity and shall monitor strict compliance therewith.

SEC. 10.  Separability Clause. ~ If any provision of this Act is
declared invalid or unconstitutional, the remaining provisions not affected
thereby shall continue in full force and effect,

SEC. 11. Repealing Clause. — Section 43 of Batas Pambansa Big.

68 is hereby amended. All laws, decrees, orders, rules and regulations, and


other issuances, or parts thereof, inconsistent with this Act are hereby
repealed or modified accordingly.

SEC. 12. Efectivity Clause. — This Act shall take effect fifteen
(15) days after publication in the Official Gazette or in two (2) national
newspapers of general circulation.

Approved,


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
First Regular Session

(ee 1224
House Bill'No.

Introduced by Representatives
DIOSDADO MACAPAGAL ARROYO and GLORIA MACAPAGAL ARROYO

AN ACT
INSTITUTIONALIZING CORPORATE SOCIAL RESPONSIBILITY, PROVIDING
INCENTIVES THEREFOR, AND FOR OTHER PURPOSES

EXPLANATORY NOTE

Corporate Social Responsibility or CSR is defined by the World Bank as
“the commitment of business to behave ethically and to contribute to sustainable
economic development by working with all relevant stakeholders to improve their
lives in ways that are good for business, the sustainable development agenda,
and society at large". Companies, be it big or small, have come up with their own
CSR programs and have used it as an effective tool in improving their public
relations with concerned stakeholders.

It is observed, however, that despite this, many corporations and other
business organizations have shown very little care for the welfare of society,
community where they operate and the natural environment around them. Their
sole purpose is to maximize their respective returns on investment totally
disregarding the impact of their activities on customers, employees,
shareholders, communities and environment.

This bill, therefore, seeks to foster sustainable economic and environment
development and environment protection, among other things, by
institutionalizing corporate social responsibility in corporations, whether domestic
or foreign, partnership and other establishment performing business in the
country. Under this bill, all business organizations are mandated to take into


consideration the interest of society by taking responsibility for the impact of their
activities on customers, employees, shareholders communities and environment
In return, businesses which shall comply with the mandate of this proposed
measure shall be entitled to full deductions of the expenses incurred in
connection thereto

In view of the foregoing, the enactment of this piece of legislation is
earnestly recommended.

DIOSDADO MACAPAGAL ARROYO GLO! MACAPAGAL ARROYO
Second District, Camarines Sur cond District, Panipanga

v


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
First Regular Session

e- 224
House Bill No. ~

Introduced by Representatives
DIOSDADO MACAPAGAL ARROYO and GLORIA MACAPAGAL ARROYO

AN ACT
INSTITUTIONALIZING CORPORATE SOCIAL RESPONSIBILITY, PROVIDING
INCENTIVES THEREFOR, AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the
Philippines in Congress assembled:

SECTION 1. Short Title. - This Act shall be known as the “Corporate
Social Responsibility Act of 2010.”

SECTION 2. Declaration of Policy. - The State recognizes the vital role of
the private sector in nation building and shall encourage its active, participation in
fostering sustainable economic development and environment protection in the
Philippines. Towards this end, the government shall coordinate its various
agencies and non-government organization to work hand in hand for the
integration, promotion, and strengthening of corporate social responsibility in all
business organization.

SECTION 3. Corporate Social Responsibility. - Any corporation, whether
domestic or foreign, partnerships and other establishments performing business
in the country are hereby mandated to observe its corporate social responsibility
or the obligation to consider the interests of society by taking responsibility for the
impact of their activities on customers, employees, shareholders, communities
and the environment in all aspects of their operations.


SECTION 4. Deductibility. — All expenses incurred by any corporation in
the exercise of its corporate social responsibility shall be fully deducted from its
gross income.

SECTION 5. Periodic Report. — All corporations and other business
organizations shall submit their annual report of activities relative to their
corporate social responsibility not later than January 31 of each year.

SECTION 6. Implementing Rules and Regulations. - The Department of
Trade and Industry shall, in coordination with the Securities and Exchange
Commission, the Department of Environment and Natural Resources and the
Department of Labor and Employment shall promulgate rules and regulates for
the effective implementation of this Act and shall regularly monitor strict
compliance therewith,

SECTION 7. Separability Clause. — If any provision of this Act is declared
invalid or unconstitutional, the remaining provisions not affected thereby shall
continue in full force and effect

SECTION 8. Repealing Clause. — All laws, decrees, executive issuances,

tules and regulations inconsistent with this Act are hereby repealed or modified
accordingly.

SECTION 9. Effectivity Clause. - This Act shall take effect after fifteen
(15) days following its publication in two (2) newspapers of general circulation.

Approved,


Republic of the Philippines
HOUSE OF REPRESENTATIVES,
Quezon City

FIFTEENTH (15") CONGRESS
First Regular Session

MINUTES OF THE MEETING OF THE COMMITTEE ON TRADE &
INDUSTRY HELD ON FEBRUARY 22, 2611 AT CONFERENCE ROOMS 9 &
10, SPEAKER RAMON V. MITRA, JR. BUILDING, HOUSE OF
REPRESENTATIVES COMPLEX, BATASAN HILLS, QUEZON CITY

AGENDA:
Deliberation on the draft substitute bill in substitution to House Bill No.1224,
entitled: “AN ACT INSTITUTIONALIZING CORPORATE SOCIAL

RESPONSIBILITY, PROVIDING INCENTIVES, THEREFORE, AND FOR
OTHER PURPOSES”

lL CALL TO ORDER

Rep. Albert S. Garcia, Committee Chairman and Presiding Officer. called the
meeting to order at 2:10 pm.
Il. ROLL CALL AND DETERMINATION OF QUORUM

On motion of Rep. Tomas Apacible, duly seconded by Rep. Victor Yu and
there being no objection. the Committee dispensed with the Calling of the Roll.
TI. | APPROVAL OF THE MINUTES OF THE PREVIOUS MEETINGS

On motion of Rep. Yu, duly seconded by Rep. Apacible and there being no
objection, the Committee dispensed with the reading of the Minutes of the Meeting
held on December 14, 2010 and thereafter approved the same.
IV. OPENING REMARKS OF THE CHAIRMAN

Rep. Garcia thanked the Members and resource persons who responded to the
Committee's invitation to the meeting.

‘The Chairman explained that the meeting was called for in order to deliberate
on two (2) proposed laws which if passed. will significantly change the way how
business is done in this country


‘The first of these measures aims to encourage and integrate social
responsibility into business as an important component to nation building.

The second legislative proposal calls for the enactment of an anti-trust law 10
level the playing field in business and to protect consumers from anti-competitive
agreements, abuse of dominant position, and anti-competitive mergers.

Submitted for the Committee's evaluation is the draft bill prepared in
substitution to House Bill No. 1224 seeking to institutionalize corporate social
responsibility or CSR among publicly-listed corporations.

The proposed CSR Act endorsed by the Technical Working Group (TWG) on
HB 1224 addresses several key concems raised during the hearing conducted on the
same bill last December 14, 2010.

Thus, Section 3 of the draft bill defines Corporate Social Responsibiliny as
the commitment of business to behave ethically and, on a voluntary basis. contribute
to sustainable economic development by working with relevant stakeholders to
improve their lives that are good for business. sustainable development agenda and
society at large

On the same section. CSR-related activities shall include, but not limited to.
charitable; scientific; youth and sports development; cultural or educational; services
to Veterans and senior citizens; social welfare: environmental sustainability; health
development; and disaster relief assistance.

Still on Section 3, any publicly-listed corporation, whether domestic or
foreign. is hereby encourage to observe CSR to complement the performance of its
business in the country.

Rep. Gatcia also pointed out that the proposed CSR Act provides two sets of
incentives for corporations engaging in CSR work.

On Section 4 of the draft bill, all expenses incurred by any publicly-listed
corporation in the exercise of its CSR as approved by the Board of Directors may be
deducted from the unrestricted retained earnings of the corporation as provided under
Section 43 of Batas Pambansa Bilang 68, otherwise known as the Corporation Code
of the Philippines

On Section 5 of the same bill, the State, through the Department of Trade and
Industry. shall give national recognition and awards to publicly —listed corporations
for outstanding. innovative and world-class CSR-related services, projects and
programs.

It shall likewise extend endorsements and encouragement to domestic and
foreign cosporations doing business in the Philippines who are candidates for
recognition in international award-giving bodies for their CSR-related activities.

He stressed that in terms of implementation, Section 8 of the substitute bill
specifies that the Secretary of Finance shall, in coordination with the DTT and
Securities and Exchange Commission, promulgate rules and regulations for the

2


effective implementation of this Act and shall regularly monitor strict compliance
therewith.

With these salient features in place, the Chair thereafter referred the draft
substitute bill for the consideration of the Body.

DELIBERATION ON THE DRAFT SUBSTITUTE BILL

Atty. Vernette Umali-Paco, General Counsel of the Securities and Exchange
Commission (SEC). affirmed that her office fully supports the objectives of the
proposed measure with certain proposed amendments.

On Section 3 of the draft bill, she recommended that the term ~publicly-fisted
corporations” be replaced with “listed and public companies” since this term has a
specific meaning in the Securities Regulation Code RA (8799).

She also suggested that the scope of CSR-related activities shall be modified
to include, but not limited to, charitable programs and projects; scientific research:
youth and sports development; cultural or educational promotion; services to veterans
and senior citizens; social welfare: environmental sustainability; health development:
and disaster relief assistance.

On Section 4 of the same bill, she opined that instcad of just deducting CSR
expense incurred by any listed and public company, these businesses shall be
exempted from the unrestricted retained eamings under Section 43 of Batas
Pambansa Blg. 68 or the Corporation Code of the Philippines,

Hence. Paragraph 2 of Section 43 shall be amended to read as follows:
“Sec. 43 POWER TO DECLARE DIVIDENDS. —
XXX XxX XxX

Stock corporations are prohibited from retaining surplus profits in excess of
one hundred (100%) percent of their paid-in capital stock, except: (1) when
justified by definite corporate expansion projects and programs, OR IN
CONJUNCTION WITH CSR-RELATED PROJECTS approved by the Board
of Directors. x x x

He explained that on the draft bill. only the amount spent by the covered
companies for CSR-related activities may be deducted from its unrestncted retained
carnings.

If after deducting the CSR-telated expense, the unrestricted earning of the
company is still beyond the threshold, then it has to declare dividends.

It will be different if the amount spent for CSR will be considered as an
exception to the prohibition to retain surplus profit in excess of 100% of its paid-in
because any retained surplus profit need not be declared as dividends.


Ms. Consuelo Suelio of the Office of Rep. Gloria Macapagal Arroyo
commented that the Author is amenable to the amendments submitted by SEC
especially on the proposed improvements on Section 4 of the draft substinute bill.

On the query of Rep Osmeta if unrestricted retained earnings have the same
effect or meaning as “tax deductible to income tax retums”, Atty, Umali-Paco
illustrated that suppose company X. with a paid-in capital stock of P1OM, has
unrestricted retained earnings in the amount of PSM.

Applying Section 4 of the proposed bill, if Company X spends PIM for CSR-
related activities, it will deduct said amount from its unrestricted retained camings.
leaving PM to be declared as dividends.

On the other hand, if spending for CSR related-activities will be considered as
an exception to the general rule under Section 43 of the Corporation Code. then
Company X is allowed to keep P1SM of its unrestricted retained earings. including
the PIM intended for CSR, without being required to declare dividends.

On the same query of Rep. Osmefia, Ay. Juanito Balbastre of the Bureau of
Internal Revenue (BIR) replied that as provided for under the National Internal
Revenue Code (NIRC), if a corporation accurnulates profits or if a corporation does
not declare dividends to its shareholders, it will be subjected to improperly
accumulated earning stocks which is ten percent (10%) tax of the accumulated
profits.

As a rejoinder, Rep. Osmeiia said that what he has in mind is whether a
corporation can abuse the situation in cases wherein they have excess inventory of
some products where they cannot move and sel] at full market value and instead of
selling. they will donate and get one hundred (100%) percent tax deductions on those
goods donated.

He is more concemed that this proposed measure on CSR may become a loop
hole or a tax shelter corporations.

Atty. Francis Lim, Managing Partner of ACCRA Law Office, commented
that the impact of the subject provision under the proposed CSR bill will be on the
shareholders and not on the taxing authority because it refers to Section 43 of the
Corporation Code which relates to the powers of the corporation to declare dividends.

Amy, Lim argued that the possible impact on tax is that the tax that may be
derived from the improperly accumulated dividends.

Consistent with the observation of the Chairman, he said that the welfare of
investors is sustained since companies are encouraged and not mandated to engage
in CSR on a voluntary basis.

Mr. Bufe Tuntia of the Pharmaceutical and Healthcare Association of the
Philippines (PIAP) averted that pharmaceutical products have short shelf lives. and
that a pharmaceutical product which is within six months from expiry date usually
has no more market value.


He inquired whether it is possible for a pharmaceutical company be credited
for tax purposes from the donation of such expiring products.

in reply, Atty, Balbastre clarified thar such a case does not apply since there is
no deductibility incentive with respect to donations on the proposed bill.

Noting that the only incentive as proposed is the deductibility of their
expenses from unrestricted retained earnings, Aty, Balbastre added that corporations
ruaht abuse this same incentive by taking on projects which they may claim as
CSR related activities in order to avoid improperly accumulated eamnings in relation
to Section 43 of the Corporation Code.

On the point raised by Rep. Osmefia, Rep. Apacible said that strict compliance
jn monitoring as provided for under Section ? refers (o the purpose of the law and not
to mandate corporations to engage in CSR activities.

The Chairman agreed to the suggestion of Senior Vice Chairman Apacible
that al) business establishments may now be included in the proposed bill which shall
be encouraged to observe CSR in the operation of their business in the country

To address the concerns of Rep. Osmefia on deductibility issue, Arty. Francis
Lim suggested the inclusion of the phrase “in accordance with the Implementing
Rules and Regulations of this Act” so that the fair market value can be factored tm.

Ms. Eli de Castro, Executive Director of the League of Corporate Foundations
(LCF). explained that the Philippine Council for NGO Certification (PCNC) is a
private self cegulating body that certifies NGOs, foundations or entities that do CSR
‘or community development work.

The PCNC assesses and certifies institutions which can qualify to become
donee institutions, and endorses the same to the BIR for the issuance of certificate for
tax exemption.

Ms. de Castro informed the Committee that the LCF commends the intent of
HIB 1224 in encouraging the practice of CSR among corporate citizens of the country.

The LCE defines CSR as a corporation's continuing commitment to perform

as a responsible member of society by behaving ethically and contributing 1
economic development while improving the quality of life of its workforce. the
community and the environment.

Moreover, the LCF viewed that legislating CSR is not needed.

Business entities in the Philippines have been fulfilling their societal
obligations for a very long time. going way beyond mere compliance with existing
laws in order to ensure a healthy business environment for its stakeholders. investors
communities, clients and shareholders.

The practice of CSR should be a voluntary commitment to ethical business
principles, as guided by the several, existing government regulatory bodies and
structures that are already in place.

5


Having stated their stand, Ms De Castro indicated that the LCF still would
Tike to participate in the deliberations of HB 1224. and put forward their foregoing
comments and recommendations:

a the phrase “publicly listed” should be removed since publicly-tisted
companies constitute a very small part of the business community . The
tajarity of the CSR practitioners belong to the group of not publicly-
listed corporations.

ca

sn Section 2, the Statement of Policy should be revised to include the
phrase “Towards this end the government should provide an enabling
environment for the practice of CSR

c. in Section 3, the phrase “CSR acrivities shall include, but not limited to
the following’ should be rephrased as “CSR activities shall cover
Inman and evoiogical security undertakings that are aligned with the
Philippines commirment 10 the Millenium Development Goals and
contribute to the realization of the UN Global Compact

4. Section 4 of HB 1224 is a repetition of the National Internal Revenve
Code of 1997 , Paying of proper taxes is part of business responsibility
to society and to the community it operates in and derives profit from.
She added that in the substitute bill. the incentive of deducting from
“unrestricted retained eamings” implies a one-size-fits-all model
which is inapplicable to many CSR practitioners. Existing regulations
Should be reviewed in order to develop incentives that are tailored for
various business entities.

eas regards Section 5, experience has shown that inadequate support
from loca! goverment units (LGUs) leaves CSR_ programs.
particularly those intended to benefit the community and the
Environment, implemented solely by business entities. The bill does
tot provide measures to address absence of support from LGUs, thus,
reinforcing the weakness of the bill.

{as regards Section 6, reporting CSR activities is already an SEC
requirement. The submission of “sustainability reports” is suggested to
encourage better performance and transparency, and to keep up with
Jobal standards in sustainability reporting, On another note. there
Should be no deadline on such reports, in contrast with the Senate bill
which imposes one.

She then reiterated their stand that the legislation of CSR is not necessary. and
that the government should revisit and strengthen existing structures that promote an
environment conducive for growth and development of Philippine businesses.

She summed up that should the government push for the legislation of CSR.

it should present a greater understanding of CSR in the context of contributing t0
national development.


VI. ACTION TAKEN BY THE COMMITTEE

On motion of Rep. Apacible and duly seconded by Rep. Ame! Ty. the draft
substitute bill in substitution to HB 1224 was approved as amended and subject to
style.

VII. SUSPENSION

There being no other matter to be taken up, the meeting was suspended at 3:12
p.m,

Certified true and correct to the best of our knowledge and ability.

LIFO A. MALIMET
ising Legislative Staff Officer I
Committee on Trade and Industry

Certified Correct by:

IENTINO R. PALANCA
/Pramittee Secretary
Committee on Trade and Industry

Noted by: -

CIA

on Trade and Industry