Social compliance of PH firms a growing issue for foreign buyers
FOBAP warning
Filipino manufacturers and exporters should start making their operations socially compliant, as foreign buyers are increasingly rejecting suppliers based on non-compliance issues, according to the leader of a group of foreign buyers' representatives in the Philippines.
Robert M. Young, chairman and president of the Foreign Buyers Association of the Philippines (FOBAP), said their group has recently begun an advocacy to promote corporate social responsibility (CSR), stressing that it is an increasingly important global issue that Filipino businesses can no longer afford to ignore.
"We have many buyers coming over, and I would say 50% of them are not pushing through with the orders" primarily because many Filipino factories are not compliant, said Young in an exclusive interview with PHILEXPORT on the sidelines of their seminar on social responsibility held October 4 in Makati City.
Buyers now are asking for a "seal of good housekeeping," and products from non-compliant factories won't be permitted to enter the importing country.
Noting that small and medium enterprises (SMEs) often equate compliance with added costs, Young said this is the wrong mindset. "They don't understand that the whole world now is changing their rules and regulations on importing products from other countries."
The additional costs, Young continued, can be regarded as a form of investment. "They can recoup their expenses when they receive their huge orders from the importers. I can tell you this because the minimum of our purchase orders begin with 1,000 dozen-12,000 pieces-it's a very sound investment."
He further said companies themselves will benefit from the increased productivity if employees work in establishments that are well lit and ventilated, have clean restrooms, operate a waste management system, and have first-aid kits and fire extinguishers installed.
Young said the CSR issue started years ago but is now gaining traction, such that even the Association of Southeast Asian Nations (ASEAN) is moving toward social compliance. "Compliant factories is a requirement. We cannot live without this anymore."
Moreover, even local buyers like the big malls are expected to eventually choose compliant suppliers "because they are now competing with the better qualities from abroad, especially with the ASEAN integration," said Young.
He acknowledged that SMEs currently face many challenges on the road to social compliance, including the high cost of power, lack of financing, and increasing wages.
Thus, he recommends that the government consider a reward program involving, for example, access to financing and tax deductions, to encourage the rise of ethical factories.
Young said social compliance will mean not only more export orders for SMES but increased revenue for the government as well.
He continued that due to noncompliance by many Filipino factories, FOBAP has had to go elsewhere, like Cambodia or Vietnam, in order to fill their clients' orders.
He claimed that the orders are already there, just waiting for Philippine factories to start complying with the rules and regulations. "FOBAP [on average] is US$1 billion a year worth of orders. That is an untapped and neglected opportunity," he said.
The organization is currently conducting roadshows over the next several months that will cover regions and economic zones to raise awareness on the issue. (Philexport news features)