Socially responsible investment

Socially responsible investment

Companies that integrate social responsibility into their
business strategies make desirable investors, especially for
Indonesia where commercial laws are inadequate, law enforcement
is weak, the government is notoriously perceived as one of the
most corrupt in the world and poverty remains widespread.

The principles of corporate social responsibility (CSR)
require companies not only to comply with the law but also to be
socially responsible, ethical in their operations and
environmentally friendly -- all the basic principles needed to
empower people.

CSR is viewed as one of the most effective business concepts
for helping developing countries alleviate poverty and for
sustainable development. CSR has, therefore, increasingly gained
recognition among governments, businesses, civil society
organizations and such international bodies as the United
Nations.

The UN has promoted CSR through its Global Compact initiatives
in partnership with large companies. The developed countries
grouped in the Organization for Economic Cooperation and
Development have also propagated the concept through the OECD
Guidelines for Multinational Enterprises. Last week, Jakarta was
the host of the fourth Asian Forum on CSR, which attracted more
than 300 participants from businesses and civil-society
organizations from around 15 countries.

As elaborated in another column on page 3 of this issue, CSR
does not only embraces standards for good business practice (good
corporate governance). It goes beyond the law, which usually sets
only the minimum floor for corporate conduct with regards to
environments and society. CSR rises above this required floor to
incorporate standards of behavior that may be expected, but are
not legally required.

Companies upholding CSR principles are particularly good at
meeting the social needs of a developing country such as
Indonesia, where legal regimes are acutely deficient and
underdeveloped in areas related to certain aspects of modern
corporate operations, which have become increasingly complex.

CSR champions go beyond the law, rather than taking advantage
of the governance failures of the law-making or enforcing
institutions. Transnational companies will not apply double
standards in their operations -- implementing CSR principles in
their home countries but, in this country, engaging in activities
that, while they are not against the law, are unethical and
damaging to society and the environment.

Although embracing the acceptable procedures and goals of CSR
is voluntary in nature, there have been efforts to
institutionalize the concept through market forces.

For example, the International Organization for
Standardization met last June in Korea to discuss the future
development of proposed CSR standards provisionally called ISO
26000, to complete the families of ISO 9000 and ISO 14000,
respectively for a quality management system and environment
management system.

Given the global impact of the ISO family standards to date,
the prospect of standards to translate the best practices in
corporate responsibility into a management system that can
achieve consistency is an exciting one indeed.

The wave of resentment and even violence against a number of
resource-based companies in remote areas soon after the fall of
Soeharto in mid-1998 demonstrated that the support of local
people or communities is vital to business operations.
Operating prosperously amid an impoverished community causes
resentment and envy, which can eventually erupt into violence.

However, the government should also help bolster the CSR
campaign by making the general business and political condition
conducive to socially responsible investment.

Officials, who for work reasons are in frequent contact with
businesspeople or company executives, should be educated on the
importance of and great benefits of CSR. Because officials who
demand bribes undermine the neutrality of the government -- the
vital principle for businesses, because only when bureaucrats
treat businesses equally will there be a level playing field.