The necessity for corporate social responsibility

The necessity for corporate social responsibility

Todung Mulya Lubis, Jakarta

In the past, various groups in society believed that the
business and social worlds were two separate and opposing poles.
They assumed that business was definitely in contradiction to
social matters, and were of the thinking that social and public
interests would always harm business operations.

Today, this perception of conflict has changed. Many countries
have begun to seek a point of equilibrium by enhancing the social
side of business and adapting social tolerance in business
practices.

At the macro-political level, balance or harmony between
business, state and public dimensions constitutes an ideal, which
all nations are eager to pursue. This equilibrium is based on the
new awareness that business, social and political institutions
should be mutually supportive and complementary, in such a way
that justice can be more extensively enjoyed by different groups
in society. One of the paths to such balance is embodied in the
phenomenon and concept now called corporate social responsibility
(CSR).

CSR can be approached from at least two perspectives. First,
it is the need to promote human rights and involve rights
protection and advancement in development and business policies.

Second, it stems from the belief of the business community
itself, which empirically has come to the awareness that profits
can be maximized only if companies affirm their commitment to
establish good relations with various stakeholders including the
social realm.

As a legal subject, companies should also become social
entities that show concern for people and the environment, so
they will not be alienated. As a legal subject they are bound by
all laws, written as well as unwritten (customary law).

It is worthwhile to note that the discourses on corporate
responsibility are frequently connected with tougher debates on
corporate accountability. Both basically share the same features
but we can find their differences.

Corporate responsibility refers to all attempts to make
companies voluntarily responsible due to ethical and social
considerations. This concept has been developed by the UN through
the UN Global Compact and the International Chamber of Commerce
(ICC). In this way, CSR depends greatly on initiatives and
goodwill, but is seen as legally non-binding. Therefore,
methodologically CSR is reached by way of persuasive and
educative endeavors.

Meanwhile, corporate accountability is related to all
corporate obligations to act pursuant to law and social norms,
otherwise the companies concerned will face consequences in
compliance with relevant provisions, which may end up in a court
case. In this concept, the aspect of law and punishment is more
emphasized. This approach is mostly adopted by NGOs, which
witness many firms' environmental pollution as well as violations
of communal rights and fundamental rights.

In the doctrine of international law, corporate responsibility
as linked with state responsibility is considerably debated. The
general view is that the state can be held responsible for
certain acts done by any non-state organ, for reasons of omission
by the state.

In addition, there is another approach from the perspective of
the positive obligation of the state, especially in the context
of international human rights law. This has to do with the
state's positive obligation arising from the enforcement of the
Civil and Political Rights Covenant (1966). It obliges the state
to make all attempts to prevent rights violations, and to
investigate and punish people involved in rights abuse, including
companies.

Over the last few years, rights violations by companies have
been taken to national and regional courts. The African Human
Rights Commission, for example, in 2001 was faced with an action
against the oil company, Shell, in Nigeria for exploiting oil in
Ogoniland and ignoring and violating rights with regard to
health, the environment and food as well as the local community's
rights -- which resulted in the disruption of foundations of
livelihood in Ogoniland.

The other case involved Unocal Inc., which, together with
Myanmar Oil Gas Enterprise in Myanmar, was accused of practicing
forced labor and exploiting child workers, in addition the
eviction of local people. The case of the National Coalition
Government of the Union of Burma against Unocal was heard in a
court in California.

Based on the facts, various theories on corporate complicity
and rights violations have been developed. Thus far, there are
several forms of complicity that can be accounted for:

First, direct complicity, meaning that a company is directly
responsible because it commits or orders rights violations.

Second, indirect complicity, meaning that a company is
indirectly responsible for rights violation.

Third, beneficial complicity, meaning that a company is aware
of rights violation and takes no steps to end it because it
benefits from the situation.

One of the basic aspects of CSR in Indonesia that has not been
well understood or practiced in Indonesia is the mechanism of
human rights audit. Several companies have had their human rights
audit handled by independent third parties. This audit may be
able to reveal to some extent the respect shown by companies for
human rights.

A human rights audit is conducted by an independent agency,
covering the theme of whether a company is already in agreement
with the policy and mechanisms on human rights legislation,
including an evaluation of the corporate procedure used for its
acceptance or settlement of human rights compliance -- as a main
feature indicating corporate responsibility.

In Indonesia, parallel to the increasing public understanding
of human rights, various business practices with the potential
to violate rights are being spotlighted, particularly the abuse
of nature conservation rights and labor rights.

At the academic level, upholding rights, is already understood
such as in the case of ExxonMobil, which was tried in a court in
Washington D.C. (2001) for alleged rights violations along with
the Indonesian government and military.

Nonetheless, it is not complete to deal with corporate
responsibility and corporate accountability without speaking also
of the scope of state responsibility. This is necessary because
in reality, all companies are located within state territories so
that the state is an actor responsible for regulation and
punishment.

Only a few discourses on state responsibility have taken place
in Indonesia. Such discussions are now being popularized by
various groups, including the government and NGOs. At this point,
both the government and businesspeople should start preparing all
the proper instruments for their adjustment to this global trend.

Consequently, one of the requirements arising from this trend
is the (central and regional) government role in formulating
regulations so that human rights compliance can go hand in hand
with its benefits: Taxes, fees, employment, contributions and
community development.

The writer is a lawyer and member of TII's board of directors.