CSR in Indonesia: Are we up to the challenge?

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.