Exporters warn of $500-M loss on non-compliance to social audit

The Philippines could lose as much as $500 million worth of export revenues if local exporters and manufacturers fail to comply with the social audit requirements of importers.

In a statement, the Philippine Exporters Confederation Inc. cited the Foreign Buyers Association of the Philippines (FOBAP) as saying the country could lose $500 million worth of export revenues if local factories would not adhere to the factory and working condition requirements of buyers.

FOBAP president Robert Young said local factories and sub-contractors of garments, apparel, shoes, bags, furniture, housewares and gift items would need to meet such requirements if they want to remain in business.

“As requirement of most major importing buyers, the goods should not be only of global quality standards, but must also be produced in a responsible and socially compliant factory and meeting the basic standards for human rights,” he said.

He said the buyers would not place orders if Philippine factories are not socially compliant.

The audit system covers adherence to basic human rights, no-child labor policy, labor and management agreement practice, correct labor wages, observance of local laws, and environment friendly practices, among others.

While the FOBAP has been implementing the social audit system for the past several years, ensuring continued compliance in the country remains to be a problem.

“Philippine factories have a record of not sustaining the compliance rules. They stop the practice once auditors are gone so buyers are transferring to more serious and honest countries like Malaysia, Korea, etc,” Young said.

As the Philippines has captured the interest of foreign buyers following the European Union’s (EU) grant of Generalized System of Preferences Plus (GSP+) beneficiary status to the country and its interest to join the Trans-Pacific Partnership (TPP), there is greater emphasis on ensuring that local manufacturers are socially-compliant.

The beneficiary status to the EU GSP+ given to the Philippines in December last year, allows the country to export 6,274 products at zero duty to the bloc for 10 years.

The TPP meanwhile, seeks to enhance trade and investment among the 12 Pacific countries: U.S., Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

“Most major American and European chain stores and importing companies require CSR (corporate social responsibility audits). It’s a shape up or ship out thing for Philippine exporters,” Young said.