Building stakeholders' trust

Building stakeholders' trust

Sudibyo M. Wiradji, The Jakarta Post/Jakarta

There is a growing awareness among local companies that
Corporate Social Responsibility (CSR) has become an important
business concept to maintain long-term profitability.

However, the lack of a clear definition of the CSR concept
makes it difficult to apply.

A company may claim that it is being socially responsible if
it takes environmental issues into consideration or if it is
actively engaged in charity and educational sponsorship programs,
even if it is also involved in illegal activities.

CSR has many definitions. The World Business Council for
Sustainable Development defines CSR as the commitment of a
company to behave ethically while improving the quality of life
of the workforce and their families as well as of the local
community and the society at large.

According to the United States-Asia Environmental Partnership
(US-AEP), CSR is a guidance system or internal standard for
corporate behavior that incorporates superior ethical
performances in the area of environment, society/human rights and
economy into a company's policies, programs and decision-making
processes.

CSR Forum states on its website that CSR should integrate the
interest of stakeholders -- all those affected by a company's
conduct -- into the company's business policies and actions.

Today, stakeholders expect companies to perform well in non-
financial areas that involve human rights, business ethics,
environmental policies, corporate contribution, community
development, corporate governance, diversity and workplace
issues.

"Social and environmental performances are side by side with
financial performance," the forum says. According to the forum,
in the global economy, companies that are responsive to the
demands of all of their stakeholders are arguably better
positioned to achieve long-term financial success.

"It is simply about good business practices" Juni Kuntari, an
associate partner of management consulting company Accenture,
said about the CSR concept.

Juni said that there was a growing recognition now in
Indonesia that the financial achievements of a company are not
only determined by its "operating factor" but also by its
intangibles such as good corporate governance practices.

A.B. Susanto, Managing Partner of the Jakarta Consulting Group
shares her view, saying that a company should not only improve
the quality of products and service, financial performance and
expertise in human resources but also business ethics,
environmental issues and the people's trust such as through
community development programs.

Susanto suggests that community development programs should
correspond to the companies' core business to make the programs
run effectively. For instance, companies that cause air pollution
resulting from their production should provide programs aimed at
minimizing the level of air pollution. "It would be odd if they
were engaged in greenery projects," he said. To make the CSR programs meet the right target, a team
involving local stakeholders, such as representatives of local
government, those representing the community and related non-
governmental organizations (NGOs) conduct an in-depth analysis on
the community's real needs, instead of short-term community
wants, before deciding on the proper CSR programs to be
established.

With CSR programs becoming quite imperative for firms that
want to compete in the international arena, companies that do not
adopt CSR can be less competitive, and less attractive to
investors.

A survey conducted by London-based Ivey School of Business,
has shown that firms that were considered environmentally
responsible experienced little risk over a prolonged period of
time because these firms had gained greater loyalty and
commitment from their stakeholders.

Meanwhile, a firm that implements CSR programs can benefit
from its improved corporate brand, because consumers are inclined
to buy products or services from companies with a good reputation
or those that make tangible contributions to increasing the
welfare of the community in which they operate.

A similar study conducted by Roper Search World has shown that
about 75 percent of respondents prefer to choose products
produced and marketed by companies that make tangible
contributions to the community's prosperity.

It said that about 66 percent of respondents were voluntarily
willing to move to other brands provided that the companies
concerned had a good image and a solid reputation by making
concrete contributions to society.