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.