According to the Institute of International Finance, the Philippines now ranks 2nd globally among emerging and frontier markets for environmental, social, and governance (“ESG”) data disclosure and debt transparency as of 2025. Surprisingly, despite this strong showing, the country has yet to implement a law that focuses on mandatory ESG compliance. Nonetheless, companies can already rely on long-standing laws and regulations in the Philippines that provide incentives for adopting ESG-aligned practices that promote green investments, sustainability, inclusive employment, and corporate social responsibility, while also helping businesses reduce operational costs.
What is ESG?
ESG refers to a set of criteria that measure a company’s adherence to Environmental, Social, and Governance standards. Some of these are mandated by the laws and regulations of the country where the business operates, while others arise from stakeholder expectations and investor pressure amid growing global concern over human rights, ethical practices, and environmental sustainability.
Several laws and regulations in different sectors that provide incentives for ESG-centered practices will be discussed in this article. These measures reflect the government’s gradual move toward promoting responsible and sustainable business practices.
Labor and Employment
There are already policies in place under our jurisdiction that promotes inclusive labor and employment in the workforce.
As a clear example, Republic Act No. 7277 or the Magna Carta for Disabled Persons grants companies an additional tax deduction equal to 25% of the total amount paid as salaries/wages to persons with disabilities, and senior citizen employees.
Some local government units have also enacted ordinances that provide additional incentives to companies employing local workers, indigenous persons and other marginalized groups.
The CREATE More Act also grants incentives, i.e. VAT exemption or Zero rating for certain essential services, such as Janitorial services, security services, and Administrative operations, including human resources, legal, and accounting services. This incentive promotes good corporate governance by allowing companies to focus on core operations while ensuring these aforementioned functions adhere to professional and ethical standards. The incentives for janitorial and security services also benefit labor-intensive service sectors, which provide more employment to low- to mid-income workers.
The Bureau of Internal Revenue also supports employee welfare by allowing employers an additional deduction from their gross income on voluntary contributions made to their employees’ Personal Equity and Retirement Account, pursuant to Republic Act No. 12214, or the Capital Markets Efficiency Promotion Act.
Corporate Social Responsibility
The Philippine Government has also incentivized corporate-giving. Under the Tax Code, certain gifts and donations are exempt from donor’s tax. These include donations made by residents or nonresidents to the National Government, its non-profit entities, or political subdivisions, as well as gifts to accredited educational, charitable, religious, cultural, or social welfare institutions, NGOs, trusts, or philanthropic organizations, provided that no more than 30% of the donation is used for administrative purposes.
In addition, the Securities and Exchange Commission (“SEC”) issued Memorandum Circular No. 4, Series of 2019, which requires all publicly listed companies to submit a Sustainability Report in accordance with prescribed guidelines. The SEC also imposes penalties for non-compliance with this reporting requirement. Recently, the Commission has signaled its intention to expand the mandate to cover large non-listed corporations, marking another step toward fostering a more sustainably responsible corporate sector in the Philippines.
Energy and the Environment
As far back as 2008, the Government has already implemented the Renewable Energy Act which encourages companies to invest in Renewable Energy businesses. Incentives include, among others, duty free importation, tax exemption of carbon credits, zero-rated VAT, tax credits, and exemption from Universal Charge.
The CREATE More Act also provide additional incentives to qualified and registered business enterprises to the extent of their approved registered project or activity under the Strategic Investment Priority Plan (“SIPP”). This plan identifies key industries that drive sustainable and inclusive growth, many of which align closely with ESG principles:
Tier I:
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- Qualified manufacturing activities, including agro-processing;
- Agricultural, fishery, and forestry products;
- Charging/refueling stations for alternative energy vehicles;
- Industrial waste treatment
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Tier II:
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- Green ecosystems: Electric vehicle (EV) assembly, manufacture of EV parts, renewable energy, energy storage, recycling, etc.
- Food security-related activities
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To encourage investments in these areas, the CREATE More Act offers various incentives for a defined period, such as:
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- Income Tax Holiday (ITH)
- Special Corporate Income Tax (SCIT)
- Enhanced deductions for expenses like depreciation, labor, R&D, training, and power use
- Duty exemption on imported capital equipment, raw materials, and spare parts
- VAT exemption or zero-rating on imports and local purchases
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These incentives reflect the government’s effort to attract responsible investments that not only boost the economy but also promote environmental sustainability, innovation, and social development.
Another relevant enactment is Republic Act No. 11898, or the Extended Producer Responsibility (“EPR”) Act of 2022. This Act amends the Republic Act No. 9003 or the Ecological Solid Waste Management Act. The Amendment basically creates a system that holds large enterprises accountable for the environmental impact of their plastic packaging throughout its life cycle. It requires producers to manage and reduce their plastic waste footprint. Large Companies are required to design and register their EPR programs with the National Solid Waste Management Commission, measure their annual plastic footprint, and meet recovery and diversion targets as mandated by the Department of Environment and Natural Resources.
Under the Act, compliant or voluntarily participating companies may enjoy tax incentives, income deductions, and exemptions from duties or taxes supporting EPR activities. On the other hand, non-compliant companies may face penal charges ranging from ₱5 million to ₱20 million and possible suspension of business permits for repeat violations.
Notably, many of these aforementioned activities also come with non-fiscal incentives such as streamlined or fast-tracked registration and approval processes.
Recently, the Securities and Exchange Commission issued Memorandum Circular No. 13, Series of 2025, which provided for the “Guidelines on Philippine Green Equity”. Under this Circular, the SEC may now designate qualified publicly listed companies with a Green Equity Label. Publicly listed companies must show, among others, that at least 50% of its total revenue and 50% of its total investments, including both capital and operating expenditures, are derived from or directed toward green activities. This move is expected to attract more investments into the country amid the growing international focus on ESG compliance.
ESG as the Future of Business Growth
As can be seen through various policies, companies can save money through proper implementation of ESG practices in the workplace. In fact, the shift toward ESG-centered business practices is no longer just a regulatory trend, but has become a clear business imperative. In the Philippines, this momentum is not only shown through growing policies but also through increasing interest from international investors. Ultimately, companies that adopt ESG principles, from inclusive employment and community initiatives to green energy and ethical governance, stand to gain significant fiscal advantages and long-term value by including these standards in their business model.