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.