Mixed perceptions of CSR prevail in Indonesia

Article by Yanti Koestoer posted : 23-05-07

From The Jakarta Post, Wednesday May 23, 2007

Four years ago, understanding of CSR among companies was still poor and patchy, let alone among the public at large. Since then, the situation has improved some, along with the increasing availability of information and roles of civil society organizations in Indonesia. Only recently, corporate social responsibility (CSR) started emerging as a popular topic in Indonesia while in fact it is not a new concept in the international arena. Many companies operating in Indonesia find it exciting to include CSR in their business strategies, but often overuse and poorly define the concept.

Some CEOs believe there is a connection, albeit vague or tenuous, between charitable contribution and business. Still, many other CEOs say that most of their corporate donor programs have nothing at all to do with business strategy, although they admit the programs could generate positive publicity and boost employee morale.

In many instances, CSR is seen as a "cause-related marketing" or "strategic philanthropy", an effort where a company concentrates on a single cause or an admired organization. This definition is far short of true CSR practices with strategic value, because it emphasizes publicity rather than social impact. It enhances goodwill, but does not improve a company's ability to compete.

True CSR practices address economic, social and environmental issues simultaneously, targeting areas of competitive context where a company and society both benefit because of the company's unique assets and expertise. CSR goes beyond charitable activity and includes issues with a direct impact on society. It does not replace/overlap the roles of government in providing public services or infrastructure, but is an add-on to those not actively managed by government.

A good and responsible company is a good citizen in the country in which it is operating. Unfortunately, beyond mending their own backyard, companies need to stay abreast of the public's evolving opinion about corporate roles and responsibilities. It is the scene we often see today, where companies (with a genuine responsible attitude) are struggling between "to do better" and "responding to criticism". This appears to be dilemmatic. We must think "out of the box" and imagine we are in such a position. Imagine that we are a CEO of a company. What would we do?

CSR brings about direct and indirect benefits to companies' triple bottom lines, i.e. commercial, social and environmental benefits, including better productivity, efficiency as well as reduced security risks and good corporate image. By caring for their surrounding community, companies gain a better reputation, improved relations with stakeholders (government and NGOs) and minimize social unrest/conflict/ sabotage, as well as greater business opportunity. CSR also embraces environmental advantages such as operational efficiency, cleaner production, raw material conservation and reduced pollution.

Typically, multinational companies (MNC) in Indonesia are largely guided by their respective headquarters when implementing CSR programs. However, their local programs usually consider local needs and context. MNCs are usually geared toward making a real impact on their target beneficiaries, while adopting international methods such as Global Reporting Initiative (GRI), Down Jones Sustainability Index and SA8000. The upcoming ISO26000 will also provide guidelines (not standards) in terms of measurable implementation of CSR.

As far as local companies are concerned, for many years there has been a government policy for all state-owned enterprises to contribute a certain percentage of their profits for community empowerment. Other private Indonesian companies have started taking part in various charitable activities, mostly in the case of disasters, some with a long-term view. Large "conglomerates" have been taking initiatives to establish their own foundations.

Unlike other emerging new paradigms that attract pros and cons, CSR appeals to all elements of the community. Those with positive thinking would hope the business sector can contribute to the development of the country, adding to what the government does for people's welfare. However, differences of perception adopted by different elements (business, government, NGOs), if not well "bridged", will potentially lead to confusion and misunderstanding between/among the development actors. On one hand, CSR is seen as a "compulsory" requirement imposed on a company. On the other hand, there is skepticism about CSR as a way of "washing away the sins" of companies.

The word "responsibility" should not merely be interpreted as "obligatory" or "compulsory". In fact, CSR is purely voluntary where companies opt to implement any business case suitable for their market and products. By adopting socially and environmentally responsible practices, companies would enjoy their "competitive advantages" and win a market share. It is not the role of corporations to take over the responsibility of the government in providing welfare to the people. Many corporations are more than willing to assist and help, but this can only be feasible if their businesses are sustainable. Moreover, it is neither the NGOs nor the government that must take a position as a "judge" or "accuser", let alone "executor". The market determines whether a business is sustainable or goes bankrupt. Research reported earlier this year by a major consulting firm showed that the majority of consumers in Indonesia would support corporations that are recognized as socially and environmentally responsible.

No doubt, good companies must abide by regulations in any country they operate, regardless of whether a certain country has a good regulatory framework or not. Challenges in implementing CSR do not come from the lack of a specific law for CSR, but are related to effective implementation of existing laws and regulations. Legal uncertainty has exacerbated more problems rather than solutions for many companies, resulting in disputes with local communities. If a company pollutes the environment and causes suffering to its surrounding community, this falls within a "legal compliance" framework. Trying to relate CSR practices with "legal compliance" is misleading and counterproductive. Paying a penalty for non-compliance to regulations (in the form of compensation to the victims) is not CSR.

We know all too well that weak law enforcement of regulations induces conflict, bribery and corruption. Regulatory inconsistencies and conflicting pieces of legislation add to this problem. An attempt to address CSR in the draft of a private enterprise law should not lead to the creation of a highly regulatory framework for CSR. Instead, it would be more effective if the government were to provide incentives such as tax incentives, government sponsorships and support to companies with high concerns on social, environment and local economic development.