Policy Issue
Local issues in the enterprises, including in the coconut sector, are seen as hurdles for Philippine exports, specifically for micro, small, and medium enterprises (MSMEs) and wouldbe exporters. A survey conducted by the Department of Trade and Industry (DTI) – Export Marketing Bureau (EMB) in 2023 surfaced issues that impede free-flow export in the agriculture sector, such as infrastructure deficiencies outside Metro Manila, high cost of doing business, market promotion, product testing, and regulations imposed by both the Philippine government and foreign government regulations.
In terms of labor and employment, the International Labor Organization (ILO) reports, “decent work deficits are generally more significant in (M)SMEs than they are in large establishments” (ILO, 2015b). The increasing frequency of severe weather events affects the growth of coconut enterprises, including their workers’ productivity and access to the international market 2. Research studies from the Asian Development Bank (ADB) and the United Nations Industrial Development Organization (UNIDO) highlighted major issues affecting MSME workers in the agriculture sector, including job insecurity and low wages, lack of access to training and development, health and safety concerns, limited social protection, gender inequality, and impacts of climate change. ADB and UNIDO report that workers experience these issues in both domestic and international markets.
Current inequalities in education and training, limited infrastructure in rural areas, and vulnerability to severe weather conditions necessitate specialized human productivity interventions for farmers. Addressing their productivity concerns and providing farmer- and gender-responsive social safety nets can address the issues above, especially with the ongoing modernization of the agriculture sector toward being a globally competitive sector brand of the Philippines.
To address the threats posed by climate-induced disasters in businesses and their workers, governments are now requiring the private sector to do Environmental, Social, and Governance (ESG) reporting. ESG reporting involves disclosures on enterprises’ sustainable practices, i.e., climate- and environment-friendly practices, compliance with labor and employment standards, and transparent governance. The goal of ESG reporting is to provide its investors and other stakeholders with valuable insights into enterprises’ sustainable practices.
Calls for urgent climate actions and increasing consumer demand for sustainable practices are expected to change the behavior of business operations, including those involved in export. Western markets (e.g., European Union, Switzerland, the United States, and New Zealand) are beginning to implement carbon border taxes, enforce due diligence in business operations, labor-friendly regulations, and supply-chain disclosures for all goods entering their borders. To ensure implementation of these regulations, the private sector is now doing ESG reporting to measure enterprises' compliance. These kinds of foreign trade regulations are expected to affect the Philippine exports. This includes the coconut goods of the country.
Moreover, the presence of ‘ESG-like’ languages is also growing in the Philippines’ conduct of its bilateral/multilateral foreign trade agreements (FTAs). Currently, the country has two (2) FTAs that have trade and sustainable development (TSD) provisions. TSD provisions are language that ensure economic growth through free trade agreements does not come at the expense of environmental protection, social equity, and labor rights. The ongoing Philippine-European Union FTA is also seen to have strong ESG-like provisions with supplychain disclosures. While foreign ESG regulations and TSd D provisions target certain business asset thresholds, i.e., large enterprises, these new regulations entail supply chain disclosures that affect MSMEs being part of large enterprises’ value chains.
Rapidly changing policies and increased compliance measures will drive and accelerate MSMEs, cooperatives, and farm workers to transition towards more sustainable business practices, ensuring their continued access to key export markets. However, should they fail to meet ESG standards in the future, they may be left behind and lose international market access. This kind of challenge is an example of a just transition issue. The literature suggests that barriers to promoting sustainable business practices among exporting MSMEs are attributed to their limited knowledge of foreign ESG regulations and emerging sustainable trends in the global market. Governments must prepare their small business for transitions aimed at enhancing their climate resilience.