CSR in Indonesia: Are we up to the challenge?

Chrysanti Hasibuan-Sedyono, Jakarta

Corporate Social Responsibility (CSR) or corporate citizenship has been the subject of much discussion here in recent times.

One senior manager of a multinational company stated: "CSR is the new mantra in business today". A highly respected former minister declared: "CSR is the essence of being successful in business".

A PR seminar advertised: "CSR -- the new PR Invention" (to the horror of CSR advocates!) And so on and so forth. Suddenly, in Indonesia, CSR has also become one of the biggest corporate fads.

Overall it is an encouraging trend indeed, though in no way comparable to the state in more developed countries, where CSR has been thriving and almost like an industry in itself, with full-time staff, websites, newsletters, professional associations and armies of consultants.

However, understanding of CSR in Indonesia still varies. While a number of corporations have built CSR into their strategies, many still regard CSR merely as a charitable activity.

No wonder, when the tsunami hit Aceh, many companies that had been involved in the relief programs declared it as being "Our CSR program" (and some smart PR executives put pictures of their CEO handing over a donation for Aceh under the heading of "CSR of the XYZ company").

Others regard community development (CD) as equal to CSR. And many forget that making profit is a part of CSR.

To understand CSR, while there are many definitions offered, it is probably easier to revisit the basic thinking underlying CSR, which is the concept that a corporation does not only have economic and legal responsibility to its shareholders, but also responsibilities to the other stakeholders.

That includes consumers, creditors, suppliers, employees, the government, the community and one silent stakeholder: the natural environment.

It follows that beside providing good dividends to the shareholders, producing safe products for the consumer is a part of CSR, as is practicing good corporate governance, or charity in various forms for those in need, or treating employees properly, or paying tax to the government, or empowering the community surrounding the company, or preserving the natural environment, or ... the list may seem endless.

Which does not at all please those who subscribe to the classic economics school of thought. Milton Friedman, a Nobel laureate from the University of Chicago is one proponent who fiercely opposes the CSR concept and sticks to the thought that a corporation's task is to make profit and its responsibility is merely to the shareholders, thus it should focus on the basics.

"Their role is to do good business, not to save the world!." However, it is hard to dispute the findings of "The Millennium Poll on CSR" survey amongst over 25 thousand average citizens across 23 countries. It revealed that when forming impressions of companies: 60 percent of respondents stated CSR-related factors, 40 percent were influenced by brand/corporate image and only 1/3 based it on business factors. This gives a very clear message, so the wiser corporations have embedded socially responsible principles in their corporate management

In a study by LSM-FEUI (a management research center of the Faculty of Economy of Universitas Indonesia) on what management concept is most influential among Indonesian companies, CSR has been most frequently (31 percent) mentioned. This is heartening. Another qualitative study done earlier by IBL/PPM indicates that the scope of CSR within Indonesia is mainly in the areas of environment; enterprise and economic development; education; human rights, labor and security; disaster relief; and good corporate governance.

To quote some examples, Coca Cola's core projects are in education, and it has developed 24 Learning Centres all over Indonesia. PT Bogasari Flour Mills supports the school for the mentally disabled in Gunung Kidul, helps villagers in chicken farming and cattle breeding, and develops SME empowering projects. Unilever's outstanding project is a "model" (to be replicated) of "adopting a village" -- Jambangan where it tried to change the paradigm of living with the Brantas river to preserve the quality of water and waterways as the source of life.

PT Riau Andalan Pulp and Paper has a massive community empowerment program in Pangkalan Kerinci, consisting of an integrated farming system, vocational training, and SME development, implemented by over 100 CD officers.

Benefits identified from undertaking CSR fall into two categories. First, commercial benefits such as improved share prices, higher productivity, reduced security risks, customer loyalty, being an "employer of choice", corporate reputation and brand image.

Second, social benefits include improved relations with public authorities and NGOs, increased trust between community groups and the company, decline in social unrest and conflict and greater potential for sustainable socio-economic development.

In Indonesia, the government sets standards for environmental elements like PROPER, and the ISO 14001 certificate gives an indication of corporations' environmental concerns. Certain institutions like the Indonesian Institute for Corporate Governance (IICG) have been producing the Indonesian Corporate Governance Index and have given awards and recognition to the 10 best corporations in this respect for the past three years.

Indonesia Business Links has conducted some pilot tests on CSR benchmarking tools adapted from those developed by the Philippine Business for Social Progress. But, overall, not many measurement tools are available yet in this country.

However, lately CSR advocacy has been taking place. To name a few, the Foundation for Sustainable Development (YPB) has been conducting training on a long-term basis with CSR as the main theme, a significant addition to the various CSR forums regularly organized by Indonesia Business Links since a few years back.

Business Watch Indonesia has been doing research on CSR related issues. The Association of Textile Industries together with the Ministry of Trade and Industry has organized three National Round Table Discussion on CSR.

The environment ministry and the Association of Indonesian Accountants launched a few months ago a competition for an Award on Sustainable Reporting.

Nevertheless, challenges for corporations in Indonesia undertaking CSR still exist, coming from within the company itself, the community and from the government.

Within companies, lack of skills and knowledge may mean that companies are not able to sustain CSR programs. Within the community, the problem of "charity" may exist because it breeds dependency.

Cultural conflicts may also occur, and community resistance is likely to happen as a result of inadequate information on the company programs.

Challenges related to the government are mainly derived from weak law enforcement across regulations in labor laws and environmental protection, as well as corruption. On top of that, there have been little or no incentives from the government to encourage companies to engage in CSR practices.

Last but not least, despite the encouraging trend, as an economy Indonesia still needs to further improve corporation's understanding of their social responsibility, particularly if we want to compete on the global market. Are we up to the challenge?

The author is vice chair of the Board of Management of Indonesia Business Links, a resource center for corporate citizenship.