Serving both stockholders and stakeholders

Serving both stockholders and stakeholders

Vincent Lingga, The Jakarta Post, Jakarta

While many, if not most, large companies in Indonesia are still
struggling even just to comply with current laws, an increasing
number of business leaders in developing and developed countries
have been promoting the principles of corporate social
responsibility (CSR).

CSR has many definitions. Some call it simply: socially
responsible investing. Others promote the concept as good
corporate governance. But the essence is the same -- it is no
longer sufficient for companies to comply with the laws if they
are really serious about sustainable development in the long
term, which will contribute to poverty alleviation.

The basic tenets of the CSR concept are by and large similar
to the nine principles in the areas of human rights, labor and
environment, which the United Nations has been promoting through
its Global Compact Initiative.

Panelists at the 4th Asian Forum on Corporate Social
Responsibility in Jakarta, which ended on Friday agreed that
companies should go beyond simply making profit, beyond complying
with the laws and beyond philanthropy.

The buzz-words at the two day conference -- organized by the
Manila-based Ramon V. del Rosario/Asian Institute of Management
Center for Corporate Responsibility -- were "socially
responsible", "ethically right" and "environment friendly
business practices".

But how can companies live up to these CSR principles in the
real business world and still serve the interests of their
shareholders by making a profit. Any way one looks at it, a
business is not sustainable without profit.

The business environment in developing countries, where laws
are mostly inadequate, the governments are corrupt and law
enforcement is weak, is often not conducive to the implementation
of CSR.

Most speakers, who are corporate chief executive officers,
stressed community development through the transfer of business
skills to rural people, the urban poor or small and micro-
enterprises as the most effective, sustainable way of
implementing CSR.

Donating to a worthy cause, though appreciated, is considered
less effective than consistent efforts to empower the local
community to provide for itself.

Bryan Dyer, Managing Director for Operations at PT PP London
Sumatra Indonesia, a plantation company listed on the Jakarta
stock exchange, emphasized the need for companies to issue not
simply a financial report, but a development balance sheet that
accounts for financial (economic) performance and achievements in
social and environmental development.

Other panelists from such large companies as Shell Group,
Unilever, Gujarat Ambuja Cements Ltd. and Jakob Oetama, Chairman
of Indonesia's Kompas-Gramedia Group, presented CSR practices in
projects designed to transfer business, technical and social
competencies to people. Companies, which cannot do CSR projects
by themselves, manage the jobs in partnership with professional
organizations or institutions.

Put another way, CSR is about capacity-building for
sustainable livelihoods. It therefore respects cultural
differences and seeks to find the business opportunities in
building the skills of employees, the community and the
government. Building competence is the main objective, not merely
throwing money around, as most state companies in Indonesia have
been doing through their small and micro-enterprise development
programs.

But capacity-building requires perseverance and even patience
because social and business competence grows similar to a healthy
economy, not by leaps and bounds, but by percentages. The main
hallmarks of this process is that it utilizes, as much as
possible, local labor, local contractors, suppliers, even when
subcontracting the jobs elsewhere could be easier and less
expensive.

The economic rationale is that good behavior is good business
because having prosperous businesses side by side with slums or
poor communities fosters resentment and eventually resistance.
This means that a company's best defense is its reputation in the
society

There are, indeed, real limits imposed upon businesses by the
short-term nature of the market. But research has shown that
sustainable value creation follows from steady, quiet investment
over a period of time rather than chasing every quarter's figures
for publicity.

CSR case studies presented at the conference also showed how
social responsibility can become an integral part of the wealth
creation process and still, with proper management, is able to
enhance business competitiveness.

CSR then is often about how company directors resolve the
dilemma of conflicting stakeholder demands that requires delicate
judgment. Sometimes, especially in developing countries, it is
about leadership and educating shareholders on the imperative of
CSR because it is the shareholders who can decide to integrate
CSR programs into the business mission and strategies for the
management board to implement.