Pollution Havens in South-East Asia: Examining Japanese Multinational Enterprises in the Philippines

Abstract

Of the significant foreign investment by Japanese multinationals within South-East Asia, the Philippines is a key recipient and location for the establishment of subsidiaries. While foreign investment is thought to bring significant benefits to host nations, the Philippines is considered ecologically vulnerable with extensive pollution and environmental challenges. Within national contexts of this nature, debates ensue about manufacturing multinational enterprises using emerging markets or developing nations as pollution havens when their environmental regulations are less stringent than those of the home nation. This study adopts a case study approach to explore the behaviour of Japanese multinationals operating in the Philippines with respect to environmental regulations. The study’s findings indicate that the firms demonstrated environmental management practices at a level beyond requirements set by local laws and regulations, with supplementary benefits to the surrounding local communities. These results indicate that the Philippines’ environmental regulations could be strengthened or tightened up with little negative impact on the investment of Japanese manufacturing multinational enterprises. With scant research conducted at the organisational level, our research findings contribute to a multinational management perspective on pollution haven/halo research, providing an additional dimension alongside the macroeconomic and large-scale environmental effects.

1. Introduction

Manufacturing multinational enterprises (MNEs) can face a complex balancing act between the ecological and the economic needs of the various stakeholders involved [1,2,3,4,5]. While it has been shown that offshoring can have positive impacts on the environment of the home nation [1,2,6], it is important to note the negative impacts have been displaced to the host nations [7,8]. One important discussion surrounds the concept of pollution havens, created when the environmental laws of developing nations are less stringent and not implemented with the same degree of rigour compared to those of the home nation of the MNEs [7,9,10]. Under the guise of a pollution haven, it is argued that MNEs may be attracted to such nations for economic benefits, as meeting lower emission and other pollution standards could be significantly easier and cheaper for them to operate [8,10,11].

On the other hand, there is a counter-argument that MNEs may assist in improving the environmental performance of the host nation. This may be through the importation of advanced pollution-control technologies, as well as improved low-pollution products and processes, creating a pollution halo [7,8,12,13]. The pollution halo effect can be linked to spillover effects, where knowledge of pollution control is passed on to direct and indirect stakeholders [14].

A significant amount of academic research centres on pollution havens versus pollution haloes in the developing nations of Asia (for example, see [7,11,15]). This appears to be a result of substantial foreign direct investment (FDI) activities by MNEs of various nations in the region [12]. South-East Asia, in particular, is recognised as one of the most environmentally vulnerable regions in the world to climate change [16]. The manufacturing sector is the largest recipient of FDI in the developing nations of South-East Asia [12,15]. Japanese manufacturing MNEs are a major participant in these nations with a little under 5000 firms located across the ASEAN, and the Philippines being host to around 250 of these [17].

The Philippines is a country with significant ecological issues and faces increasing challenges from climate change, including rising sea levels, increased risks of floods, heat waves, and other associated weather-related events [18,19,20]. It has one of the highest population densities in the region, combined with a low gross domestic product (GDP) [21]. The nation suffers from extensive pollution of its waterways and, more recently, marine plastic litter. Behind Indonesia and China, the Philippines is recognised as the largest contributor to plastic pollutants in the world [22].

With much of the research to date on pollution havens, pollution haloes, and regulatory impact appearing at the macroeconomic or regional level, very few studies investigate impacts at the firm level. Studies at the firm or organisation level emphasise accountability towards environmental performance for the private sector particularly for the parent organisation operating across host nations. Against this backdrop, research is required to understand the influence and impact of Japanese MNEs on the environmental performance of the Philippines. Furthermore, there appears to be a general paucity of pollution haven and pollution halo studies specifically for the Philippines. For example, more recently, Abbasi et al. focused on a select sample of Asian nations in their study of pollution haven/halo and the environmental Kuznets curve from 1985 to 2020 but the Philippines was not a country of focus [11].

This manuscript contributes to the literature by providing much-needed empirical research on the pollution havens of manufacturing multinationals operating in the Philippines. A second contribution of this manuscript is its adoption of a case study design, with its focus on two Japanese multinational enterprises operating in this nation. With much of the research to date on pollution havens, pollution haloes, and regulatory impact appearing at the macroeconomic or regional level, very few studies investigate impacts at the firm level. Studies at the firm or organisation level emphasise accountability towards environmental performance for the private sector particularly for the parent organisation operating across host nations. The mere presence of MNEs operating in developing and emerging countries carries significant expectations given the sheer size and potential influence they have over production facilities and through their expansive network of stakeholders operating within their value chains [2,23,24]. This is evident across South-East Asia, with a high volume of MNEs operating in the region who are expected to drive sustainable development practices [2]. With scant research conducted from the private sector at the organisational level, the aim of our research is to contribute to a multinational management perspective on the topic of pollution havens, providing an additional dimension alongside the macroeconomic and large-scale environmental effects.

A review of the literature is presented in the section below, followed by a description of the methodology employed in this study. Next, is a discussion of the results, with the final section providing the conclusions and limitations of this research.

2. Literature Review

2.1. Pollution Haven Effects

The earliest work related to pollution havens is said to be that by Pethig who proposed a general equilibrium model to link the movement of pollution-intensive industries to environmental management laws [25]. A literature review [26] reveals the extensive testing of the hypothesis since that time through various methodologies. Despite the large range of host nations studied, the findings have been inconclusive, resulting in an ongoing debate regarding the pollution haven hypothesis.

A wide-ranging study of 55 countries carried out by Jobert, Karanfil, and Tykhonenko attempts to explain the varying results by positing that pollution havens only hold where environmental laws are extremely lax or non-existent [27]. A further finding was that extremely tight environmental regulations actually encouraged pollution-intensive FDI [27]. The authors of the study speculate that this may be driven by factors such as regulatory stability required by pollution-intensive industries. Other factors such as geography and agglomerative effects in varying cleaner production techniques are highlighted by Costantini, Mazzanti, and Montini [28]. They also found that regional technological spillovers are more impactful than internal innovation in environmental management by companies. Their findings are of significance, as factors beyond environmental regulation may impact pollution haven-seeking behaviour.

The largest body of research in most recent times on pollution haven research appears to be in connection with China. According to Cai et al. China has provided a unique opportunity for those testing the pollution haven hypothesis [7]. It is simultaneously a nation that hosts high-pollution MNEs, and itself a user of other developing nations as hosts for Chinese high-pollution industries. Various analytical techniques to prove the pollution haven hypothesis are used in these papers including carbon emissions on import and export [7], movement of industries based on regulatory changes [29], and community involvement [30]. While these papers on China appear to generally support the pollution haven hypothesis, they take a high-level view, with the absence of granular firm-level investigations. This means that the various motivations and contextual reasons MNEs behave in a certain way fail to be captured.

Research was also carried out in China but at the level of firms [15]. The study focused on the reaction of smaller MNEs to regulatory changes in environmental management compared to large MNEs. The research team found support for both the pollution haven and pollution halo hypotheses, contingent on the MNE’s size. However, they did not investigate the reasons certain MNEs decided to stay or relocate when regulations changed. Furthermore, the transferability of the findings from the China sample to other developing nations needs further investigation.

Looking more broadly at research focused on other Asian nations, Bakirtas and Cetin [31] confirmed the pollution haven hypothesis for Korea and Indonesia, based on a linkage between FDI and greenhouse gas (GHG) emissions. They state that the pollution haven hypothesis had not been tested on these nations previously, which shows rapid economic development and a strong democratic government that encourages FDI [31]. A short time later, Adeel-Farooq et al. published a study also confirming the pollution haven hypothesis in Indonesia, as well as eight other developing nations of Asia [12].

However, as with most of the research pertaining to pollution havens, the investigations are not carried out at the firm level and instead focus on macroeconomic and large-scale environmental effects. An exception is Kathuria who carried out a firm-level study based in India [32]. The study attempted to use the environmental abatement costs collected from survey data to estimate the stringency of environmental management laws in each Indian state. The study theorised that low levels of regulatory requirements would coincide with greater FDI in manufacturing industries if the existence of a pollution haven were to be proven. No such link was found, with researchers instead positing that other factors such as market size and infrastructure had a greater bearing on the location of the industry [32]. This finding aligns strongly with that made by Jobert et al. and supports a view that the costs of environmental management may be low in comparison to the benefits brought about by larger markets and lower overall operational costs [27]. In reviewing the extant literature, it becomes apparent that even if the pollution haven hypothesis may be confirmed at a macro level, heterogeneity across firms and localised factors may provide differing results at a granular level.

2.2. Japanese MNEs and Pollution

Most of the extant literature relating to how Japanese manufacturing MNEs act on environmental sustainability issues appears to centre on environmental laws and policies. The starting point is often traced back to the rapid and unrestrained industrial development witnessed in Japan during the first half of the 20th century, with little consideration for the environment [33,34,35]. While the economy experienced significant growth and expansion, several major public health catastrophes, often referred to as the ‘Big Four Pollution Diseases’ occurred as a direct result of this growth [33,36,37].

Wokutch posits that, for this reason, environmental concerns became the first sustainability issues to be considered by the Japanese legal system [35]. In 1967, the Japanese government, through the Ministry of Environment (MOE), introduced the Basic Law for Environmental Pollution Control, followed closely in 1968 by the Air Pollution Law [38,39]. A flurry of activity followed in 1970, with the parliamentary pollution session when 14 environmental laws were amended or legislated [40].

Studies have been carried out on the efficacy of Japanese government environmental policies in Japanese manufacturing firms. An example is one study that looked at wastewater treatment technologies over a 50-year period in Japan, starting from 1961 [41]. The research showed a close association between the emergence of new technologies with government environmental management policies and social pressure.

Kanada et al. investigated the long-term effect of policies on air pollution in the Japanese city of Kawasaki [37]. The city was chosen due to it being one of the largest industrial centres in the country, as well as a prevalence of respiratory issues in its residents, referred to as ‘Kawasaki Asthma’ [37]. Where many studies on atmospheric pollution concentrate on GHGs, Kanada et al. concentrated on the levels of sulphur dioxide in the air [37]. Once again, the findings of this study showed a positive correlation between the introduction and amendments to government air pollution policies and the number of pollutants in the air. These studies indicate that Japanese MNEs will adhere to and react to changes in environmental regulations. It is not clear, however, whether Japanese MNEs would treat other nations, particularly developing nations, as pollution havens by meeting only the minimum required levels or actively seeking countries with poor environmental governance. Several studies have provided some initial indications about the potential behaviour of Japanese MNEs in developing nations.

In a study of outbound Japanese FDI to Malaysia, Indonesia, and the Philippines, Elliott and Shimamoto investigated whether these host nations were being used as pollution havens [42]. They found that pollution abatement costs were not a determinant of Japanese FDI in a host nation. This appears to confirm the postulation by Jobert et al. that the cost of meeting even the strictest compliance levels is outweighed by the benefits of a large local market, and that the pollution haven hypothesis does not hold in such contexts [27].

In other studies, Cole, Elliott, and Okubo state that pollution haven effects are stronger when Japanese companies invest in developing nations, and in industries where environmental management costs are the greatest [43]. They also found that Japanese manufacturing MNEs outsourced the highly polluting stages of manufacturing to other nations, finding consistency with the pollution haven hypothesis [44]. Despite this, they also found that the strengthening of environmental regulations by host nations would likely only result in the MNE relocating high pollution segments out of the host nation, leaving existing operations largely intact [44]. This is important as there may be significant latitude for host nations to tighten controls without the fear of large-scale job losses.

While these studies provide indications of Japanese MNEs adopting approaches consistent with the pollution haven hypothesis, they have investigated this from an industry level of analysis. This perspective fails to capture the firm-level motives and actions when dealing with host nation regulations, limiting their utility in providing in-depth insights into Japanese MNEs and their environmental sustainability practices.

2.3. Philippines and Pollution

A significant body of research exists regarding environmental issues in the Philippines. Much of the recent research revolves around the pollution of waterways (for example, see [22,45,46]), with the work by Migo, Mendoza, Alfafara, and Pulhin looking specifically at three industrial water pollution events caused by industry [47]. The underlying issues appear to be related to the challenges government departments experience when trying to effectively enforce laws regarding water pollution.

From this aspect, Ferrer, Garces, Perez, and Pomeroy [48] investigated the organisational effectiveness of marine area management through alliances of local government units. Even with the cooperation of multiple local government units, inadequate funding and difficulties in implementing policies were identified by the study as hurdles to good environmental management [48]. Other studies investigate consumer attitudes towards sustainability (for example, see [49]), resource management and wealth distribution (for example, see [50,51]), as well as small business sustainability (for example, see [52]).

However, to the authors’ knowledge, there appears to be a general paucity of papers related specifically to the Philippines and pollution haven research. While the Philippines has been studied as part of wider pollution haven research (for example, [7,12,42,53]), very little research focuses on the behaviour of MNEs with respect to the environmental regulations of the Philippines. One piece by Ahmad et al. examined the relationship between environmental pollution and financial development for 18 emerging economy nations including the Philippines using data from 1984 to 2017; however, the research did not specifically address pollution havens [54]. This gap in the literature, along with the paucity of research on pollution havens at an organisational level, highlights the value and contributions of this paper.

3. Materials and Methods

Previous firm-level research into the pollution haven and pollution halo phenomenon, such as that by Kimbara and Murakami, was carried out through surveys sent to the MNEs [55]. While methods such as surveys may allow the collection of large amounts of comparable data, they do not allow for deeper investigations into the motives and the reasons behind the current situation [56]. Another issue highlighted by Yang et al. is that conflicting evidence of pollution haven and halo research arises due to the difficulties in finding suitable metrics for environmental regulations in quantitative studies [57]. As such, environmental management laws can be perceived as subjective, and only of value if adequate indicators are defined.

Indicators such as FDI amount [42], carbon emission related to imports and exports [7], firm closures [15], and relocation patterns [29] have been utilised to debate pollution haven research. However, these are at best estimates, as individual situations of the firms have not been studied. It also becomes apparent that the terminology ‘pollution intensive industry’ also varies in definition, such as from a “process which requires payment of an abatement cost in order to meet government regulatory requirements” [44] to “industries that have asbestos, arsenic trioxide, certain pesticides, certain organic chemicals or nonferrous metals in their products” [29].

Moving from these methodological limitations associated with pollution haven/halo research, we adopt a qualitative case study approach to explore the behaviour of Japanese MNEs operating with respect to the environmental regulations of the host nation, the Philippines. Since 1977, the Philippines have required environmental impact statements (EIS) for any project that could have a significant impact on the environment. Evolving since its inception, the Philippines Environmental Policy and the Philippines Environmental Code were expanded in 1987 to include the duty of the state and rights of the community [58]. The main responsible agency is the Department of Environment and Natural Resources (DENR) [58].

The use of a qualitative case study approach enables deep investigations into the possible motives of the MNE locating the subsidiary operation in the host nation, as well as gaining an understanding of what environmental management means to the MNE. This study sought to understand considerations of the MNEs and did not attempt to generalise results. With a focus on the organisational or firm level, case study research “scientifically investigates into a real-life phenomenon in-depth and within its environmental context” [59]. Numerous studies in business and management highlight the value of adopting case studies to examine how companies undertake actions to address sustainability within their business operations, in particular MNEs and sustainable development in Asia. For example, Zhu, He, and Liu conducted multiple case study research on firms to examine pollution-intensive firms in the Shangyu, Zhejiang province of China and their restructuring strategies [60]. Likewise, Pranugrahaing, Donovan, Topple, and Masli utilised multiple case studies when examining corporate sustainability practices in Malaysian-based MNEs [61]. Others have adopted single, in-depth case studies such as Hacking who explored the sustainability assessment frameworks with the Asian Development Bank [62] and Pranugrahaing et al. who investigated the sustainability practices implemented by a financial institution within Malaysia [63]. Single case studies offer a suitable strategy for an in-depth study to understand Japanese MNEs and the environmental regulations of the Philippines host nation.

Japanese manufacturing MNEs operating in the Philippines were identified based on three criteria. First, the size of the investment was determined to be a significant criterion as we wanted to hear from MNEs of considerable size given their expected corresponding impact on the environment and the economy where they were located. This was set at USD 20 million and above. An additional criterion was for MNEs to have public sustainability reports on their company websites to enable the triangulation of data for research credibility and rigour [64]. A final requirement was for the MNE to have established or have expanded its subsidiary operation in the preceding 10 years. Emails were sent to the MNEs that met all criteria; representatives from two MNEs responded to the email call. The research context was explained including the request to interview personnel with familiarity with the establishment/expansion process and an understanding of broader sustainability issues within the organisation. The interview schedule was emailed to the key personnel prior to the interviews taking place to enable time to clarify and/or discuss any matters related to participation.

The MNEs are referred to below as MNE P1 and MNE P2; the former from the packaging sector and the latter from the automotive and transportation sector. At the time the interviews were carried out, MNEs P1 and P2 had both been in operation for over a decade. In addition to this, both MNEs had recently expanded their manufacturing capacities, and, in the case of MNE P1, necessitated further approvals from the government and other stakeholders. Ten respondents from various management/leadership positions participated in interviews (please see their details listed in

Table 1. MNE Participants.

MNE	Industry Sector	Interview Respondents
P1	Packaging, paper and related	Vice President Assistant Vice President and Plant Manager Management Services Manager Planning Staff Human Resource Manager Finance Manager
P2	Automotive and transportation	Executive Vice President Senior Vice President Controller Division Vice President Corporate Affairs Manager-Education

).

The interviews were carried out with the 10 key personnel from the MNEs in the host nations, at the MNE premises in face-to-face meetings. Each interview lasted from 45 min to one hour. Semi-structured interviews took place which enabled the research team to adapt the nature of the questions to the specific context of the organisation and provided flexibility to tailor questions to the interviewee’s responses to pursue further questions on emerging salient points of interest [56]. The initial interview schedule was framed around how the subsidiary operations of the MNE were established, and more specifically the role local laws and regulations played in the location selection. Respondents were asked what development-related issues were faced and how these were addressed. A question was also asked about the involvement of the local community during the establishment and ongoing operation of the manufacturing plant. All interviews were transcribed verbatim.

The data were organised and coded using NVivo 11 adopting a process based on the work of Braun and Clarke [65]. This consisted of reading transcripts in their entirety and then re-reading them once again in a process of familiarisation. An initial coding scheme as outlined by Lei, Voss, Clegg, and Wu [66] was proposed, where multiple team members share and discuss potential codes applied to data with an ongoing process of review and refinement. A thematic analysis was then conducted leading to the emergence of three major themes. These were the MNEs’ policies regarding compliance with the host nation’s regulations, issues related to compliance, and finally spillover benefits and halo effects. The line of questioning would also allow the distinction between extrinsic and intrinsic motivation as described by Shah and Arjoon [67]. Intrinsic motivation in self-determination theory is described as actions that are carried out voluntarily based on freedom, autonomy, and altruism. Extrinsic motivations are the result of external forces outside of the control of the organisation [67]. Where the MNEs provide spillover benefits beyond compliance, it is possible that this could be the result of economic rationalism. For example, the cost of going beyond regulatory requirements may be justified in increased sales or better competitive reputation. Shah and Arjoon argue this would be a case of extrinsic motivation [67]. Where the MNE provides benefits for more altruistic reasons, such as a true desire to assist the development of local communities or improve the environment, the actions would be driven by intrinsic motivations. In terms of environmental management, the motives are important, as actions driven by intrinsic motivations are likely to be sustained, while extrinsic motivations are not [67].

4. Results and Discussion

4.1. Compliance Level Policy

Both MNEs in the sample operating in the Philippines met local environmental regulations and went through an EIS during establishment as described by Swangjang [58]. In addition, local communities were involved during the initial establishment, as well as the expansion of the factory in the case of MNE P1. A respondent at MNE P1 explained this process in more detail: We had a third party to do the details [of the EIS] for us. It’s an environmental consultancy group. They do the scoping of the community. There are clearances that they secure from the barangays [wards], it is part of the requirement; the documentations, water, surveys and air (MNE P1). This is important as the involvement of the community indicates that the environmental laws are not simply developed and implemented by government officials. From the statement, it is clear the community is involved in the approval process. The use of an external consultancy also adds credibility to the process, in that the MNE may be less able to change the outcome of the review by being at arm’s length. Another respondent added: On an informal basis, we practically know these people, the homeowners, the officers, the local government officials, barangay captain, police stations, bureau of fire (MNE P1). This further consolidates the view that the community is considered an important stakeholder by the MNE. As a compliance policy, it is apparent that the MNE’s approach is to not only meet the regulatory requirements but to ensure they have public participation in the process.

In the interview with respondents at MNE P2, it was emphasised that all regulatory requirements were being met. The respondent reflected: [We have] been complying with all the conditions imposed by [the] DENR (MNE P2). While the statement in isolation is relatively unremarkable, it is an additional statement by the respondent which provides a significantly different perspective. Extending beyond just the regulatory context of the Philippines, the respondent reflected on the broader adoption of the MNE global standards: In addition to the compliance with Philippine government regulations, [the MNE] complies with the [MNE’s] global standards that address environmental concerns and other development issues. (MNE P2). The importance here lies in the fact that the MNE works to a global corporate standard that is higher than that of the host nation’s government. In further explaining the global standards of the MNE, the respondent went on to state: … a company-wide Environmental Management System has been established, paving the way … to be awarded the ISO 14001 certification, a set of standards and requirements established by the International Organization for Standardization for Environmental Management (MNE P2). This gives credence to the claim that the global standards of the MNE are of significance, as they can be audited by an internationally recognised external certification body. The respondent stated further: [The MNE] is in 40 countries. In each country, we have to respect the local culture and we adjust to local laws. For us, it is a given … In addition, we have the [MNE’s] global standards that are applied in each plan even if the local country does not require it. It is [the MNE’s] responsibility as a global company (MNE P2). This statement reinforces the image that the company voluntarily maintains its corporate environmental practices not only in the Philippines but in every host nation it operates, regardless of economic or other conditions. A strong sense of intrinsic motivation is displayed in this statement, as it appears to emanate from the MNE’s sense of self, and not as a response to external pressures.

4.2. Compliance Issues

The tightening of environmental regulations can cause issues for MNEs if they are not already operating well above the current requirements. This is illustrated in the case of MNE P1 when their production facility was expanded. Due to changes in the legislation, better filtering equipment was needed for the new factory’s chimneys compared to the equipment at their existing facility. This resulted in significantly higher costs, as explained by a respondent:

It was also the time when the Clean Air Act was being initiated. That’s why we invested in an electrostatic precipitator machine. The act requires new facilities to follow the new standard. And the emission levels allowed are much lower than the usual … For the old facilities, they maintained the [old] standard. That was a challenge because the initial design is to use the same standard as we have known it

(MNE P1).

Another respondent at the MNE noted: The cost of the investment for the new technology was very significant. Very big. It was [a large sum of money] in investment. That’s just the equipment. We still had our operating costs …Without getting any financial returns (MNE P1). The MNE proceeded with the installation of the best available technology (BAT) despite the significant investment required. This shows evidence of intrinsic motivation by the MNE, as it carried out the action despite the impact on the economic performance of the plant in the short term. Other challenges faced by MNE P1 were spurious or unfounded complaints made by local residents, as explained by a respondent: Sometimes, there are complaints that we investigated but we found nothing. Invalid complaints include complaining about trash that was not ours. It was trash from their neighbours (MNE P1). This illustrates how the presence of a large MNE can make them the primary suspects of any environmental problem occurring in the vicinity. Nevertheless, maintaining a process of monitoring and managing the environment meant that the MNE was able to quickly respond and investigate the claims against it.

The respondents at MNE P2, on the other hand, did not recount any specific issues they faced in meeting local environmental requirements. In terms of the expansion of their manufacturing facilities, a respondent stated:

No [need for additional environmental permits], since [the subsidiary] has been in operation for [over a decade] prior to the new investment. The new investment did not require the construction of additional building or clearing of land. DENR was already conducting regular monitoring of [our subsidiary] operations and [our subsidiary] has been complying with all the conditions of imposed by DENR

(MNE P2).

In contrast to MNE P1, no physical expansion of the factory building footprint meant that an EIS was not required. However, it is also apparent from the statement that continual monitoring of the facility was carried out by the government regulatory authorities for compliance.

4.3. Spillover Benefits and Halo Effects

When MNE P1 equipped the chimney of their new factory with BAT to meet stricter environmental management regulations, they also proceeded to retrofit the chimneys of the old factory with the same technology. This was not required by the law, as the new limits were not retrospectively applicable to existing facilities. A respondent explained: They also installed a second one in the old plant even if the old technology was complying with the standard because it was an old installation. So practically now, you don’t see smoke coming out of the plant (MNE P1). This action over and above the requirements effectively doubled the already high cost of pollution mitigation for the MNE. Furthermore, they did not manufacture products consumed directly by the local community. As the products were used by other businesses, there was little to gain in terms of sales from public relations with the surrounding community. Nevertheless, the action had long-term benefits beyond economic and ecological ones, as explained by a respondent:

We are glad we did it because we are still reaping the benefits years after … We reduced the smoke significantly that is it is almost invisible to the naked eye. We still have emissions, but it is significantly below the standard … there is still smoke but there is no dust. The dust and sulphur dioxide were eliminated. For the new installations, the limit was [removed for deidentification]. For the older installations, it was [removed for deidentification]. Half of the older ones … Previously, there were some neighbours that were complaining about the smoke. That is why during the expansion, we also installed the new environmental standard on the old facility. We really strengthened our relationship with them

(MNE P1).

It is apparent that the changes to the older chimney were made in direct response to community concerns. This implies the existence of an effective public participation method, whereby the community has both the means to raise concerns with the MNE, and that those concerns are listened to and actioned. Another respondent stated: It was also a way of telling our neighbours that we care. And we’re glad we did [the additional pollution control measures] because the surrounding community are happy (MNE P1). The strong relationship between the MNE and the residents of the community in the vicinity of the MNE’s operations is re-emphasised in this statement. It completes the loop in a process whereby the issues were monitored, resolutions were actioned, and feedback was provided to the community.

A notable example of knowledge spillover is mentioned by one of the respondents regarding solid waste management. Solid waste management is of particular importance in the Philippines, as the proximity of industry and population to waterways results in the nation being a major contributor to ocean pollution [46]. The respondent explained as follows: Our liaison officer is also active in the solid waste management. Mostly barangays are tapping our staff as resource personnel in seminars. Not only here but also in other barangays and schools (MNE P1). The statement illustrates how knowledge gained by the MNE is being passed on, not only to the communities immediately surrounding the MNE but also to those in the region.

It appears MNE P2 did not consult the community when they established their operations. This was more likely due to the fact they were in an industrial zone business park, and there were no residences in the vicinity at the time. A respondent stated: No, the local community is not involved in the decision-making process [for establishment]. However, the impact of business operations in the local community is always considered (MNE P2). While the community may not have been directly consulted during the establishment process, they were certainly considered during the operation of the plant. Another respondent at the MNE noted: Prosperity in isolation will lead into trouble. That is why we have CSR activities. We want inclusive growth of the community (MNE P2). Some of these corporate social responsibility (CSR) activities for the growth of the community included the construction of housing in conjunction with a poverty alleviation NGO, and various programs associated with public schools in the region (MNE P2). While these programs were not related directly to environmental considerations, they were part of a raft of measures by the MNE to contribute to society.

Beyond these, MNE P2 had carried out various environmental enhancement activities. One such activity involved creating and maintaining a large forest area in an industrial area which has become home to many types of birds. These actions helped alleviate issues related to continuing conflict between various stakeholders over urbanisation and conservation areas as described by researchers such as De Leon and Kim [68]. MNE P2 has also set up a rubbish trap on a river in the vicinity of its operation. Once more, the importance of solid waste management in waterways is emphasised as a major issue in the region [46]. The rubbish trap prevents floating refuse from entering the nearby sea and is maintained by the MNE.

To understand the views of its interested parties, MNE P2 hosts annual stakeholder conferences. These conferences involve shareholders, employees, business partners, customers, local government, and local community representatives. It was noted that all costs for hosting the conferences were borne by the MNE. These conferences provided the opportunity for feedback from the stakeholders to the MNE’s management for consideration (MNE P2). In addition to the formal annual conferences, it appeared that the MNE carried out frequent contact with the community in their vicinity: We are continuously in touch with community representatives … I make sure that their concerns are discussed with management and these are responded to appropriately (MNE P2). Another respondent commented: [Our engineer] regularly talks with outside stakeholders to get their views and he brings their perspectives in during internal management discussions (MNE P2). Both statements indicate a continual monitoring and feedback of information from the stakeholders back to the MNE, and it may be assumed that the MNE’s actions are also reported back to the stakeholders. Hence, it appears that a significant number of the activities carried out by both MNEs are not only addressing local regulations but also going beyond what is required by law or any local environmental standard.

5. Policy Implications

The findings of this study may provide some policy insights to developing and emerging nations in terms of setting environmental management laws for manufacturing MNEs. It appears that Japanese manufacturing MNEs will continue to invest in host nations, even if there is a significant financial cost related to meeting environmental regulatory requirements. The MNEs in this study also appear to have provided additional benefits to the local communities in which they were operating. These existed in the form of knowledge and services that went beyond a higher level of environmental management. In general, these additional services are not what would be typically expected of MNEs utilising the host nation as a pollution haven. However, it is recognised that companies are not “unconditional greenwashers or environmental stewards” but instead follow “multiple signals from their key stakeholders” [69], highlighting the importance of the regulatory frameworks and community feedback.

6. Conclusions

The evidence suggests that both MNEs worked at levels above those required by the host nation’s regulations in various aspects of pollution control. MNE P1 showed intrinsic motivation in providing the additional high-cost pollution control equipment when it was not required by law, nor contributed to increased sales. These results suggest that environmental controls may be of significant cost compared to the MNE’s revenue stream but will nevertheless be implemented.

When environmental regulations were tightened, the MNE could have relocated its operations to less tightly regulated countries. This relocation could have been achieved through environmental outsourcing of highly polluting steps in production to other host nations as posited by Cole et al. [44]. However, it is apparent that this did not occur. MNE P1 also showed a close connection to the community surrounding its operation, with regular communication, and other beneficial activities.

MNE P2 was not affected by changes in emission regulations or required to carry out an EIS of its expanded manufacturing capabilities. Although not tested in this regard, they carried out other actions supporting the environment as well as the wider community. Intrinsic motivation is evident in the activities such as the rubbish collection on the river which passed near their operations. This was not required by law, and likely not highly visible to people outside of the MNE. MNE P2 also maintained close and regular contact with the community and other stakeholders through both informal and formal channels. These consisted of regular meetings by staff with external stakeholders, as well as annual conferences organised by the MNE.

The limitations of this study stem from the number of MNEs that participated. However, a certain degree of transferability across different Japanese MNEs may be assumed due to the homogeneity of Japanese society and idiosyncrasies of the Japanese management system [35]. The transferability of the findings to other host nations, even within the South-East Asian region, cannot be assumed. A further limitation is that only respondents from the companies were interviewed without corroborating evidence from broader stakeholder groups of the MNEs, potentially skewing these positive findings. Finally, neither of the MNEs that participated were involved in the petrochemical industry, which is associated with high pollution potential [44].

There are several areas for further research that become clear in consideration of these limitations. The first is the behaviour of Japanese Manufacturing MNEs in other host nations located in the South-East Asian region, with similar contexts as the Philippines in terms of GDP, population densities, and other FDI related factors such as manufacturing related costs. The second is for the sampling of other Japanese manufacturing MNEs in the Philippines, particularly in the petrochemical industry. A third area for consideration is the advent of emerging Industry 4.0 technologies such as the application of blockchain and the role of MNEs in addressing issues of climate change. Whilst evidence exists for the ability of blockchain to improve sustainability practices through improved tracking of manufacturing products, potentially reducing waste and improving efficiencies [70], it can also amount to significant energy use, mining, and pollution with the generation of electronic waste [71]. Blockchain technologies present challenges for the environmental performance of manufacturing MNEs in host nations and remain an area worth exploring.