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.