Looking at corporate social responsibility

Dan Kingsley, Jakarta

Private enterprise funded development programs are becoming more widespread in the business world as more and more enterprises are becoming concerned with the social implications of their activities.

This concern is reflected in voluntary business initiatives that some international firms have made to varying degrees of success in the Indonesian extraction industry. These may comprise employee and volunteer programs, training and education activities for local communities, micro credit schemes, supplying schools and small businesses with equipment.

The Corporate Social Responsibility (CSR) programs in Indonesia are run out of corporate headquarters with department names such as "community development", "business development", community relations" or just the basic "public relations".

Although well intentioned, these operations usually have a greater impact as public relations vehicles benefiting the corporation than they do as implementers of projects that have measurable development benefits to the communities affected by their corporate operations.

Although the well-intentioned purpose of the operations in to assist the local communities surrounding the extraction operations, the programs are usually implemented from the office, and by nature of this are not usually successful. It is my contention that if the programs initiated are public-private initiatives they would be much more effective, both in securing sustainable objectives through government "buy in" and through a genuine community-corporate collaboration.

It is certain that private sector funded CSR operations may have some benefit in assisting social development, but I am sure that all stakeholders will agree that the benefits relative to the costs are very minimal. This is certainly well known to the financial controllers who calculate the per capita cost of such programs.

Having been involved with both public and private sector funded projects, I have seen no correlation between the funds spent on the specific project and the level of successful sustainable development. The greatest successes have always been those that have the intimate participation of both the local community and the local corporate operations- especially the employees.

This inefficiency would not be permitted if the goal were revenue; something the NGO's, corporations and government understand. Given that impact is very difficult to quantify, these two stakeholders tend to work separately, with a great deal of disconnect from the communities they are tasked with assisting.

The first major problem is the lack of commitment from the Indonesian government to impose rule of law to ensure development in the communities. Given that effective implementation of CSR programs requires the machinery of an effective democratic government and civil society, this is something that the corporations cannot count on in the short term.

It is still premature to expect this from the current government given the lack of good governance and the structural changes required to develop accountable civil programs. Indonesian government stakeholders can only be expected to support CSR programs in Indonesia when the tools of civil society become stronger and legislatively sound.

The second is the lack of interaction with each other or with the community. Very little impact in terms of sustainable development can be achieved if politicians, corporate boards, special interest funded NGO's and shareholders are interacting together and alone, without the proper input for the affected communities.

Public-private sector interaction is vital for success, and it must come at the very beginning of program design and implementation. Each community has different needs, social and economic, and without understanding them individually, effective development will not result.

Corporate community involvement is specific to each individual enterprise, but through partnership between company employees and the community, with financial support from the corporations, programs are often successful.

There is a two-pronged approach to successful implementation of community development programs: partnerships involving the corporation and community actors, and employee driven initiatives carried out by the corporation. The key is to implement these programs such that they are market driven with accountability and that they rely on some sort of return on investment made by the community and the corporation. Those returns may be in the form of improved education and healthcare that affects all stakeholders including the government, or may be in the form of improved local private sector enterprise that will benefit the local communities economy and the corporate operations' supply chain.

Based on the input I have received from the extraction industry and some of the local communities affected by that industry, it seems that a simple formula exists for initiating sustainable community development that can have a positive impact. In most cases it is a matter of focusing on the simple tasks, but through sincere involvement from the corporate management side.

It also requires corporate commitment to development of important market systems such as micro finance and distribution institutions, and it requires the direct participation of the employees in the community. This last factor is important in any development activity, as the employees are the stakeholders that have the most interaction with the community, and share the same basic cultural and social understanding of how to develop the local economy. The community will attend to its social needs once the local economy can be integrated into local operations and is able to survive on its own through basic market forces.

Productive results can come from effectively implemented CSR projects, and can have great benefits to corporations in terms of leveraging costs of risk management, however it is important to keep it simple.

The writer is managing Director of Trade Management and Development Services Ltd. and is involved in projects within Indonesia and other SE Asian countries. He can be reached at dkingsley@tmiconsulting.com