CSR in Indonesia - A dynamic landscape by NGO Prakruthi

CSR in Indonesia: A dynamic landscape Yanuar Nugroho, Jimmy Tanaya, Theresia Widiyanti, Adhitya Hadi Permana The Business Watch Indonesia

CSR in Indonesia: A dynamic landscape

Yanuar Nugroho 1, Jimmy Tanaya 2, Theresia Widiyanti 3, Adhitya Hadi Permana 4 The Business Watch Indonesia 5 A shorter version of this piece, with the same title, will appear as a chapter in The World Guide to CSR edited by Wayne Visser (pub. date expected 2009)

Acknowledgements Henry Heyneardhi and Domi Savio Wermasubun discussed the materials and presentation; Veronika Ratri Kustanti helped data and archive retrieval; Jennifer Hayden read and corrected the language.

Introduction Corporate Social Responsibility (CSR) is an emergent discourse in Indonesia, not only in corporate practice but in the larger political-economic landscape as well. The movement aims to improve the social, environmental and accountability performance of business, however, the uptake of CSR practices can be observed outside the business realm as well in government agencies and civil society organisations.. This mainstreaming is understandable as the corporate practices which CSR addresses have long been scrutinised in the Republic. While private sector and business firms have positively contributed to Indonesian development, it is also evident that some of its rampant malpractices, particularly those of large corporations, have been detrimental to the society and economy while threatening environmental sustainability. The ideal implementation of CSR in Indonesian society would address this malfeasance, but the model has yet to produce diffuse achievements. Using recent data, this chapter explores the dynamics of CSR in the Indonesian context in terms of both conceptualisation and practice. From the outset, we note the current discord regarding what CSR is and how the idea should be exercised. The term is interpreted in many ways indicating that this may now be a contested arena of discourse. The contestation arises from the dynamic landscape on which the conceptualisation and practice of CSR is based, this however, could benefit from a revisit, reinterpretation and enrichment specific to the Indonesian context. Regardless of its shortcomings, CSR has in fact been creating a new space for dialogues between actors in three main domains: government (public bodies), business, and society. 1

Corresponding author. Senior Advisor of the Business Watch Indonesia; Research Associate with the Manchester Institute of Innovation Research, Manchester Business School, Univ. of Manchester, UK. Correspondence address: yanuar.nugroho@manchester.ac.uk

Research Associate with the Business Watch Indonesia; Doctoral Researcher in the Sustainable Consumption Institute-Doctoral Training Centre (SCI-DTC) and Manchester Institute of Innovation Research (MIOIR) at Manchester Business School, Univ. of Manchester, UK.

Researcher at the Business Watch Indonesia

The Business Watch Indonesia: Potrowanen RT 04/RW 02 Desa Donohudan, Ngemplak, Boyolali 57375, Indonesia. Tel. +62-271-7653806. Email bwi@watchbusiness.org

CSR in Context The passing of Law No. 40/2007 on Limited Liability Companies made CSR mandatory; this came as a shock not only for business but also for many other concerned parties. Despite disagreement, those familiar with Indonesia and its social, economic and cultural background may understand why CSR has, historically, not been the mainstream in business practice. Despite serious campaigns, CSR has more often been adopted by companies for the sake of image building rather than genuinely improving their corporate conduct. The explanation for this ‘greenwashing’ trend begs a more thorough exploration which reaches back in history rather than simplistic contemporary accounts. While on the one hand Indonesia is a unique case due to its CSR mandate, on the other there are more historical and cultural contexts that constrain, rather than support, the burgeoning of CSR. These historical and cultural contexts partly explain why “CSR Law” 6 is strongly opposed by firms and it is now under a judicial review. 7 CSR is largely seen as a western-led initiative which hinges on western values (Kemp, 2001). The root of capitalism in Indonesia trace back to more than half a century ago when Indonesia was colonised by the Dutch Vereniging Oost-Indische Compagnie (VOC, the Dutch East India Company). The colonial period bequeathed “a complex mélange of patronage, monopolies (the so-called conglomerates) and the commensurate concentration of wealth and power” in business practices (Kemp, 2001: 2). This pattern was strongly ‘promoted’ by President Soeharto in his administration and it resulted in the concentration of capital in his cronies and families. The effect of such a strong patronage was not only that Soeharto’s clients, cronies and family were above the rule of law, but also that firms and companies – whether or not directly linked to Soeharto’s circles— were also immune to law enforcement, let alone local citizen or non-governmental organisation (NGO) pressure. 8 In addition, rampant corruption has worsened conditions. This ‘immunity’ enabled (and still does) firms to disregard good corporate practice and environment standards. For instance, it was common knowledge in Indonesia that Environment Impact Analysis (AMDAL) is unreliable to describe firms’ real (negative) impacts on the environment. These conditions have slowly been improving since Soeharto resigned in 1998 and the flagrantly corrupt ‘immunity’ has been stripped off. Since then firms have been constantly pressured by NGOs and other civil society organisations (CSOs) to be socially and environmentally responsible (Kemp, 2001). It is no longer as easy 6

See the Legislation & Codes section.

The review is proposed by the the Indonesian Chamber of Commerce (Kamar Dagang IndonesiaKADIN), the Indonesian Association of Young Entrepreneurs (Himpunan Pengusaha Muda Indonesia-HIPMI), the Association of Woman Entrepreneurs of Indonesia(Ikatan Wanita Pengusaha Indonesia-IWAPI).

Note that under Soeharto’s administration, firms and business in general were regarded as important actors in development as it brought in money and thus deserved to receive exceptional treatment. The industrial sector grew at more than 10 percent annually in most years. During this period, the most important fragment of economic development was the period of rapid economic liberalisation between the mid-1980s to mid-1990s (Bresnan, 2005). Please also see discussion about Barito Pacific in Kemp (2001).

as it was under Soeharto’s era for firms to violate environmental and social standards. Integration with global markets through neoliberal policies 9also constrains firms from being harmful to society and the environment as global consumers demand that firms operate ethically and respect some international standards. This is why, in spite of its weaknesses, forcing CSR as a mandatory practice is welcomed – especially by those concerned with business (mal-)practices in Indonesia. In a religious context, Islam, as the most practiced religion (accounting for 70-80% of the population) in Indonesia may be contributing positively towards CSR through the Islamic philanthropic approach (Kemp, 2001). However, there are calls that CSR should move beyond the philanthropic approach to a community development agenda (Achda, 2006). This demand is strong especially in regions where government-led local development projects are seen as inadequate. Considering the above mentioned historical context including the rampant corruption, it becomes clearer to the outsider why CSR was not embraced by firms in Indonesia. CSR has mostly been practiced by transnational corporations (TNCs) thanks to pressure from non-governmental organisation (NGOs) and consumer groups in the northern hemisphere. 10 This creates an impression of an ongoing arena in Indonesian business where Profit champions over Environmental and Social interests. The enactment of Law 40/2007 11 will, arguably, create a sea-change. However, this is yet to be capitalised due to two primary reasons. First, the Law, specifically article 74 which regulates CSR, is under judicial review. Second, amidst the strong inclusion in the Law, the concepts, principles and standards of CSR are inconclusive. To the latter reason, we anticipate that firms –as exemplified by current CSR practices - will use standards, principles, and concepts that may be detached from local contexts. In turn, this will further justify the view that CSR is greatly value-laden from a western perspective, and therefore, will further strengthen the accusation of “green washing” through CSR. We view CSR as a genuine approach, and therefore; we argue that though CSR is historically a western-led initiative, it should be coupled with local needs and problems (i.e. a ‘localised’ CSR). In so doing, CSR will cement its position as an initiative to balance economic-environmental-social interests while not succumbing to the potential for its use as a mere marketing tool. Thus, we conclude that identifying local problems and needs is a critical step to elucidate sound reasoning of specific CSR approaches and in turn, to assist in managing CSR practices in Indonesia more widely.

This has been since the re-introduction of the World Bank’s and International Monetary Fund’s ‘structural adjustment programme’ (SAP) responding to the economic crises in 1997-1998 (Khor, 2000; 2001; Shiva, 1999).

Although, these TNCs may not call their policies as CSR policies. However, they use, for example, labour standards that were better than those of domestic firms (Kemp, 2001).

Please see the section Regulations & Codes

Priority Issues Populated by more than 230 million inhabitants with growth of about three million each year, Indonesia is the fourth most populous country in the world after China, India, and the United States of America. The country still suffers from the prolonged impact of the Asian economic crisis of 1997 which led to the regime change a year later. Despite having a more democratic administration, at the moment unemployment is still rising and poverty is hardly being reduced as 110 million people still live on less than $2 USD a day. Indonesia continues to face poor political order, increasing trends of criminality, especially in urban areas, wide spread corruption in public offices, which is partly a result of business bribery, and religious fundamentalism, among other things. Besides natural disasters like the tsunami in 2004, earthquakes, and outbreaks of polio and avian influenza, the country still has to deal with issues like the impact of decentralisation on the poor, inadequate allocation of resources from the central level and the absence of minimum standards or regulations for basic services. The latest statistics show that about 13 percent of the population above 15 years old is illiterate; infant mortality is 34 per 1,000 live births; 24 percent of children under the age of five suffer from malnutrition; and only 80 percent of the population has access to improved water sources (WB 2006). Furthermore, a host of environmental problems remain unchecked; pollution, overextraction of natural resources and deforestation are the most prevalent among these. Nearly 50 percent of Indonesian forest has been deforested since 1950 (FWI/GFW, 2002) and half of that remaining has been converted into roads, plantations (palm oil, wood processing, etc.) or factories. It is estimated that every minute five hectares of forest disappears â&#x20AC;&#x201C; which means that a forest area equal to the size of a football field vanishes every 12 seconds, whilst 40-50 million Indonesian people's lives are heavily dependent on the forests. Nearly 50% of the labour force works (or more than 65% of the total population is engaged) in rural activities (BPS, 2007) 12. But, sadly, rural development has generally been characterised by deteriorating land fertility due to the green revolution, low productivity and low living standard. After the 1970s oil-boom, national development policy heavily favoured industrial-and-urban oriented over agrarian-and-rural based development. This policy push meant that more farmers moved to urban areas and became factory workers while, concomitantly, significant swaths of farming land were converted into industrial estates or (sub)urban settlements. In cities and towns across the archipelago, however, the problems are typical: opportunistic and shorttermism in urban planning and development resulted in severe congestion, flooding, increasing slum areas and little protection for poor urban dwellers, who mostly work in the informal sector. The most recent data (February 2008) reveals that around 73.5 million Indonesian workers work in informal sectors. These are among the most important and salient issues that need to be addressed in Indonesia. Given the complexity and reach of the issues involved, government action is not enoughparticipation is needed from the wider society. The business sector has started to acknowledge the magnitude of the problems through CSR initiatives which can be a means for engaging business in development activities. 12

See National Statistics Bureau, â&#x20AC;&#x153;Population 15 Years of Age and Over Who Worked by Main Industry 2004, 2005, 2006 and 2007â&#x20AC;?, online at http://www.bps.go.id/sector/employ/table2.shtml, viewed 20 June 2007.

Trends There are three main trends apparent in CSR dynamics in Indonesia today. The first of these trends is observable in a CSR that focuses on community development (CD). Perhaps due to the previous authoritarian regime’s legacy of severe poverty, CSR in the form of CD is seen as an effective and convenient way for the private sector to provide assistance to poor people in the local community- this has the added effect of granting the business legitimacy. It is widely known that a large number of companies, particularly in the extractive sector, have caused externalities but very few compensated the local inhabitants who bore the cost. Under Soeharto’s authoritarian regime, (social) movements demanding any form of just compensation were restrained as it was seen as detrimental to the investment climate. Nowadays this sort of movement has become more salient – even to the point that some groups openly demand the closure of particularly egregious businesses. It is not surprising, then, in the post-Soeharto era, to see CD-type activities blooming as a handy means for companies to channel compensation (to a limited extent) for the damaging externalities they caused, while, at the same time seeking legitimacy and a social license to operate. Historically, this movement has been occurring alongside a revival of CSR like concepts which can be traced back to earlier works (e.g. Matten, 2006; Vogel, 2005). However, a recent study (one of a very small pool which concern CSR in Indonesia) indicates that compared to other Asian countries, not only does Indonesia have the lowest levels of CSR penetration, but it also has the lowest levels of community involvement (Chapple and Moon, 2005) 13. This certainly plays down, or at least begs the question of the effectiveness of CD as a CSR practice, since this particular strategy is overwhelmingly reported by Indonesian companies. The second prominent CSR trend is in reporting. It is assumed that the greater the extent of the reporting, the more engaged the company is with CSR and the more seriously it can be taken therein. A recent comparison among Asian countries, (from the same study mentioned above), shows a wide range of reporting practices- from India, where only one in six CSR companies reported at the minimal level, to Indonesia where three quarters of CSR companies’ reporting was minimal. The study concludes that, overall, the percentage of companies reporting their CSR activities extensively was relatively low. In no country did a majority of companies report CSR extensively, and in only two cases- India and the Philippines- did more than a third report it extensively (Chapple and Moon, 2005:427-428). As of January 2008, there were 376 companies in various production sectors listed in the Indonesian Stock Exchange (Bursa Efek Indonesia, BEI or IDX). A simple tabulation concerning modes of CSR reporting by these companies is presented below.

The issues here are also distinctive with an emphasis on agriculture and local economic development, community development, and supporting religious organisations. The findings, however, should be interpreted with some caution given its relatively low number of CSR companies (n = 12) investigated in the study (Chapple and Moon, 2005:431-432).

CSR Reporting by companies listed in BEI/IDX Aspect

No.

Percentage (%) of total

Companies with official website 208 55.32 Companies without official website 168 44.68 Companies with no CSR reporting in the website 108 28.72 Companies with CSR programmes featured in the websites 17 4.52 but not included in the CSR reporting (in the website) CSR programmes reported in the annual report 52 13.83 CSR programmes reported in a separated report format 7 1.86 Source: Business Watch Indonesia based on IDX data (www.jsx.co.id or www.idx.co.id)

Looking closer at the figures in the table, assuming companies without official websites do not produce CSR reports, total companies without any CSR reporting accounts for 73% of all 376 companies listed in IDX. This exposes a rather disturbing fact- being listed in IDX, or, ‘going public’, means that companies have responsibilities foremost to their shareholders including to widely inform them of all business operations, including CSR programmes. The fact that nearly half have no website at all is perhaps ironic as a website is a strategic means for just such a purpose. An even more striking fact is that only seven companies produce stand-alone CSR reports 14. Another recent study delves deeper into this realm. Even when CSR reporting is replaced with a more inclusive term, like ‘social disclosure’, the performance of Indonesian companies listed in IDX is no better. The main foci of social disclosure from these companies are- labour (51.6%), customer (19.4%), society (14.7%) and environment (14.3%), respectively. Further, there is no significant difference in the presentation of social disclosure amounts in the above mentioned themes between companies in the basic and chemical industries group or in the variety industries group (Mirfazli, 2008). The third trend concerns initiatives for awarding CSR practices. One such initiative is the ‘CSR Award Indonesia’ programme 15, sponsored by the Indonesian Ministry of Social Affairs and Corporate Forum for Community Development (CFCD), which campaigns for and promotes good CSR practice in companies operating in Indonesia. The award was initially instigated by CFCD together with SURINDO, University of Indonesia’s LDFE, Bogor Agriculture Institute’s FEMA, University of Trisakti’s LPKM, SWA Magazine, Markplus & Co and the Ministry of Social Affairs. The award hopes to motivate companies to implement CSR more fully and thus become a model for others. Another trend worth-mentioning is the emergence of the so-called multi-stakeholder forum. These forums characteristically bring together different actors representing different interests in society: business, government, and social groups (mostly NGOs). An illustrious example of the later group is Roundtable Sustainable Palm Oil (RSPO) which aspires to promote the growth and use of sustainable palm oil products by 14

They are PT Antam Tbk, PT Asahimas Tbk, PT Bukit Asam Tbk, PT Holcim Tbk, PT Telkom Tbk, PT Inco Tbk, and PT Uniliver Tbk. The data is processed from various sources including companies’ websites (as per January 2008) See http://www.latofienterprise.com/pdfcsr/PanduanCSRaward.pdf. This programme has been organised twice, in 2005 and in 2008.

means of global standards and stakeholder engagement. Companies joining RSPO are expected to be more committed in conducting their CSR not only as CD activities but as a more comprehensive sustainable business practice laid out in RSPO’s Principles & Criteria (P&C) 16. Another similar initiative set up in 2008 is Forum Sertifikasi Teh Indonesia, or Indonesian Tea Certification Forum (FSTI) which was initiated by a multi-stakeholder meeting in Indonesia. These initiatives lead to certification and standard initiatives. For example, FSTI initiates tea certification (i.e. UTZ certified, Rainforest Alliance and Ethical Tea Partnership/ETP), while RSPO establishes RSPO certification for palm oil. The final trend to note is the revitalisation of certain government initiatives which were once undermined. For example, PROPER – a government programme for public disclosure of environmental compliance – began as a government policy initiative in 1995. PROPER is run by the Ministry of Environment and assesses compliance on water pollution control, air pollution control, hazardous and toxic waste management, implementation of Environmental Impact Assessments (AMDAL), environmental management systems, waste management and resources conservation and community development. It also produces as a colour-coded environmental performance rating, which ranges from (worst to best) Black, Minus Red, Minus Blue, Blue, Gold. PROPER works alongside other sustainability measurements as well and uses a voluntary approach. In 2008, PROPER came under fire as it certified several big polluters like Lapindo Brantas as environmentally sound (‘Blue’) 17. These trends show that CSR practice in Indonesia is still very much dominated by community-development type activities rather than a full-blown CSR as a measure of responsible, accountable and ethical business practices. The voluntary nature of CSR may play a significant role here as it implies a concept whereby companies integrate social and environmental concerns in their business operations and in their interactions with their stakeholders on a voluntary basis. This approach creates a problematic artificial divide between CSR and issues of corporate accountability and governance. Integration of these realms would help enable the realization of robust CSR where the positive effects of a firm are increased while negative effects are mitigated. It is, therefore, necessary to review the legislation which directly and indirectly affect the conceptualisation and practice of CSR in the Indonesian context.

See RSPO’s website: http://www.rspo.org

See the headlines of The Jakarta Post, 08/06/2008 (Adianto P. Simamora)

Legislation & codes Indonesia is a unique case where CSR has been made mandatory by the enactment of the Law No. 25/2007 on Investment and Law No. 40/2007 on Limited Liability Companies although these laws are regarded as normative, and the implementing regulations are yet to be introduced. Prior to these two laws, there were numerous laws and regulations concerning corporate codes of conduct. We categorise these into five aspects, i.e. environment; human rights and labour; business ethics; consumer protection; and anti-corruption. Law No. 25/2007 concerning Capital Investment Mandated CSR in Indonesia began with the enactment of Law No. 25/2007. In relation to CSR, Law (UU 25/2007, article 15) dictates that every investor is obligated to (a) apply principles of good corporate governance, (b) implement corporate social responsibility, (c) respect local cultures and traditions surrounding investments’ area, and (d) comply with the laws. The responsibilities of investors with regard to CSR (UU 25/2007, article 16) are (a) to maintain environmental conservation, (b) to care for employee’s safety, health, comfort, and wellbeing, and (c) to comply with the laws. Infringement of the Law is penalised with warning, moderation of business, cessation of business, and even withdrawal of business permit (UU 25/2007, article 34). The Law is however ineffective due to the weak nature of the definition; the absence of implementation guidelines, principles, and standards; and that it does not require investors to report on their CSR programmes. The Law defines CSR as “The responsibilities attached to every investment so as to maintain a harmonious and balanced relationship that concur with the environment, local’s values, local’s norms, and local’s cultures”. Whilst the absence of guidelines, principles, and standards may create ambiguity, it also perhaps creates an advantage for the investor, i.e. the flexibility to choose any CSR guidelines, principles, and standards that are best-fitted to the firm. Law No. 40/2007 concerning Limited Liability Companies The Law supersedes the Law No. 01/1995. In comparison with Law No. 25/2007, the Law No. 40/2007 moves one step forward by introducing the firm’s liability to report CSR activities in addition the annual report (UU 40/2007, article 1:3). It defines CSR as “the commitment of the Limited Liability Company to take a role in developing a sustainable economy in order to improve quality of life and environment function either for the Limited Liability Company itself, or for local communities, or broader society” (UU 40/2007, article 1:3). CSR however, is only compulsory for firms involved in natural resource extraction and ‘other related industries’ (i.e. any limited liability company whose business is not in the extraction industry, but affects natural resource functions (UU 40/2007, article 74)).18 Moreover, firms are allowed to treat CSR expenditures as costs in their accounting subject to the fairness of such expenditures. There will be a sanction, which is as yet undefined, should firms fail to implement CSR. 18

This definition creates an ambiguity. By referring to affect to natural resources functions and that every business activities in production cycles consume and affect natural resources, it can be loosely understood that every firm is a subject of mandatory CSR approach.

Other key regulations on corporate code of conducts are tabulated below. Aspects

Environment

Key Regulations

Highlights (related verse)

Law 23/1997 concerning Environmental Management

Environmental impact analysis is mandatory (15) and a pre-requisite for business license (18); Waste treatment and management (16, 17); environmental audit (29); Full responsibility for environmental mitigation (35); Community and NGOs are able to take legal action against firms (37, 38). Sanction: Fine Rp. 100 million – 750 million (US$ 10,000 75,000 at Rp 10,000/US$), imprisonment; three to 15 years. Law 29/1999: Core principles of human rights (2-7) The rights to live and to procreate (9-10) The rights for self-development (11-16) The rights for justice (17-19) The rights to free from slavery (20), religious freedom (22), political freedom (23), freedom of assembly (24-25), freedom from discrimination and free movement in Indonesia (26-27); The rights for free from fear (28-35); The rights for welfare (36-42); The women’s rights (47-51) and children’s rights (52-66); Civic participation (100-103)

Human rights and labour

Law 39/1999 concerning Human Rights Law 13/2003 concerning Manpower

Law 13/2003: “Children” are anyone younger than 18 years old (1); Equal access to job and non-discriminatory treatment (5, 6, 32); access to skills training (12), job contract (52-63); outsourcing is allowed only for supporting work not for essential work and should not reduce in any form labour rights (65, 66); in general, no child labour is allowed (68), exception is granted for small and light work and the minimum age is 13 y.o. (69). Written consent from guardian should be obtained and adjusted working conditions must be provided (71-74); Adequate working condition in term of safety protection, salary, and welfare (67-100), Arrangement regarding salary (88-93); Labour union (119); Firms are not allowed to undergo Lockout as a reaction to normative demands of labour union (146). Layoff is accepted only on some grounds (151153, 158-168) and subsequently, adequate severance pay should be paid (156). Sanction: Fine Rp. 100 million - 500 million (US$ 10,00050,000);

Aspects

Key Regulations

Highlights (related verse) Imprisonment: one to five years. (183-188)

Consumer protection

Anti corruption

Law 8/1999 Concerning Consumer Protection

Law 31/1999 concerning the Eradication of Criminal Acts of Corruption (and the amendment, Law 20/2001) Law 15/2002 concerning Money Laundering (and the amendment, Law 25/2003) Indonesia’s Criminal Procedure Code (KUHAP)

Source: Desk study, Business Watch Indonesia

Consumer’s rights (4) and responsibility (5); Producer’s rights (6) and responsibility (7, 19, 24-27); Illegal corporate conducts (8-16), especially for advertising sector (17, 20); Adhesion contract (18); Consumer groups and community are allowed to monitor goods and services available in the market (30, 44, 46); Sanction: Fine: up to Rp. 500 millions (US$ 50,000) Imprisonment: up to five years. Law 31/1999: Abuse of power (3), bribery (13), and Collusion (15); Society has access to information (41) Sanction: Fine: up to Rp. 1 billion (US$ 10 million) Imprisonment: up to 20 years Law 15/2002: Types of hot money (2) and money laundering criminal acts (3); Specific regulations regarding banking and other financial institutions (8-17A) Sanction: Fine: up to Rp. 15 billions (US$ 1.5 million) Imprisonment: up to 15 years

Organisations There are key business associations and other organisations in Indonesia that promote CSR. Without being exhaustive they are depicted below. No

Organisation

Members

Website

The Business Watch Indonesia (BWI)

www.fair-biz.org

Indonesia Centre for Sustainable Development (ICSD)

www.icsd.or.id

Mirror Committee on Social Responsibility Indonesia (MC SR)

www.new.srindonesia.com

Indonesia Business Links (IBL)

www.ibl.or.id

Corporate Forum for Community Development (CFCD)

www.cfcdcenter.or .id

Notes BWI is an NGO who took part in the campaign and initiative of the mandatory approach on CSR in Indonesia. This was achieved through BWIâ&#x20AC;&#x2122;s involvement in the introduction of Law 40/2007. An independent, non-partisan, non profit group, which promotes sustainable development through collaborative research, policy analysis, training, institution development, conflict analysis and resolution, networking, community development and information exchange. ICSD also provides CSR training on a regular basis. Mirror Committee on Social Responsibility Indonesia (MCSR) is commissioned by BSN from December 2005 to the end of 2009 in response to the issuance of ISO 26000 as an international guidance for Social Responsibility. MCSR comprises of 15 experts covering six types of stakeholders, i.e. private firms (2 members), government (4 members, 2 from BSN), labour union (2 members), NGO (2 members), consumer group (2 members), and three from others/individuals* Indonesia Business Links (IBL) is a not-for-profit foundation established in the wake of the Indonesian economic crisis. It aims to contribute towards the creation of sound and ethical business practices in the country. IBL is an affiliate of the Prince of Wales International Business Leaders Forum (known also as PW-IBLF or IBLF). CFCD is a forum founded by 15 firms and institutions participating in a short course on Community Development for Companies run by Centre for Regional and Urban Study (PUSWIKA), the University of Indonesia on 24 September 2002. CFCD is an association

Organisation

Members

Website

Notes which consists of Community Development Officers in firms and social workers and has a specific rule for its membership.

A+ CSR Indonesia

www.csrindonesia. com

CSR Konsorsium

n.a.

LEAD Indonesia (Yayasan Pembangunan Berkelanjutan â&#x20AC;&#x201C; Sustainable Development Foundation)

www.lead.or.id

A+ CSR Indonesia is a social enterprise that gathers various expertise on CSR issues. It is believed by A+ that by so doing, problems in CSR implementations would be identified and necessary policy recommendations could be suggested. This expertise could be utilised to enhance CSR concepts substantially. A+ aims to maintain balance between constructed critiques to firmâ&#x20AC;&#x2122;s social and environmental performance and an optimistic attitude toward performance improvement. CSR Konsorsium is a forum founded to enable CSR stakeholders to share experiences and strategies of CSR practices. The forum aspires to build common understanding of CSR amongst stakeholders. It welcomes inputs and research findings about CSR bestpractice.

In 1992-2002 YPB and LEAD network (Leadership for Environment and Development) co-organised a programme to promote sustainable development through LEAD Associate Training (LAT) participated by mid-career professionals from government agencies, private sector, academic institutions, NGOs, and mass media. LAT, supported by Rockefeller foundation and conducted at national, regional and international level for a period of long term training

Organisation

Members

Website

Notes

(50-80 days), enables participants to have the opportunity to get the insight of development issues, exchange ideas, develop deeper understanding of various country challenges, and to develop their network. Those who have completed LAT then become LEAD Fellows. Source: Desk study, Business Watch Indonesia. * 2006 data

Case studies To aid in comprehending the nuanced dynamics of CSR in Indonesia, some case studies of particular CSR programmes are presented here. British Petroleum and human rights issue. When initiating a project in West Papua, BP openly and explicitly stated that, unlike other extractive companies operating in Indonesia, it would not use and work with the Indonesian military force when facing social problems. BP keeps its promise and now intensively liaises and interacts with local indigenous groups using the so-called Community-based Security Approach. This case is a successful example –perhaps the only one among multi-national companies operating in Indonesia— where military force and violence are not a means in dealing with local concerns. Bir Bintang (Heineken/Multi Bintang Indonesia) and labour issue. In 1978, well before other such intitives took place in Indonesia, MBI (Multi Bintang Indonesia) facilitated a consultation forum for the trade union and board of directors or commissioners. MBI has also been a pioneer of good corporate conduct in terms of industrial relations, workers-and-company consultation and the improvement of work conditions. 1997 saw the 12th collective bargaining round at MBI. The company also set up an Occupational Health Committee in all of its plants and one of which was awarded a ‘Zero-Accident Award’ for two consecutive years. Overall, MBI’s labour policy complies with the Indonesian Law No. 13/2003 on Labour and meets all requirements relating to work hours, wages, allowances, collective bargaining. MBI also provides additional benefits specifically for employees, such as a cafeteria, regular health check-ups, facilities for sport and religious observance, and a pension fund among others. Holcim Cement and Green Building issue. In order to promote its sustainable development discourse, Holcim Cement initiated the Holcim Award. This award aims to educate and foster the creative ideas of young people in designing environmentally friendly and sustainable buildings. Holcim Cement also conducts a CD-type CSR programme which has given three large water tanks to a village in East Java. These tanks provide 40% of the water needs for the area. Holcim has pledged to further build physical infrastructure and farming facilties in the area. Panasonic and Good Electronic issue. Good Electronic has been a central motif for the CSR activities of Panasonic Indonesia 19 whereby the production of electronic devices strives to be environmentally friendly. To realise this ambition, Panasonic Indonesia has started producing lead-free solder which is far more environmentally friendly than traditional lead solder. Panasonic has also implemented waste disposal management which aims to achieve a zero-waste target by means of increasing material recycling which hit 74% 2002 and is rising. In addition there are two well know CD-type CSR programmes of Panasonic: Panasonic Peduli Pendidikan (education concern) which provides scholarship for Indonesian to pursue masters degree in Japanese universities and Panasonic Peduli Budaya (cultural concern) which facilitates the preserve of local cultures in Indonesia like pencak silat (martial arts), keris (Javanese sword), batik and jamu (traditional herbal medicine)

http://panasonic.co.id/web/cid/MainCont/1137

Freeport Indonesia and environmental issue. Responding to heavy criticism about its business practices, Freeport Indonesia (PTFI) initiated some CSR programmes. For example, in 2009, they introduced a recycling bin which followed the introduction, a year earlier, of plantation pots which are made from the recycled containers of acetylene plants. This initiative is targeted to local schools in Timika as part of PTFI’s commitment to undertake a 3R programme (reduce-reuse-recycle) to educate students and local communities and make them aware of the importance of waste separation20. Another initiative involves cooperation with the local government of Mimika’s Office of Education in an Inisiatif Tunas Lingkungan (environmental initiative), which began in 2006 and aims to build environmental awareness and concern among junior high school students. This initiative facilitates presentation-socialisation activities, outbound environmental programmes, community service and creativity-focused activities. According to the “Working towards sustainable development” report 2008 21, PTFI has started a Tailings Management Programme in collaboration with the Research and Industrial Affiliation of ITB (Institute of Technology Bandung). This programme has been investigating the use of tailings as construction materials in the Mimika region and the for the drainage systems used by PTFI itself. Of the endeavours, the most notable achievement is the use of tailings waste as backfill materials in the Timika Airport. In addition, hundreds of thousands of mangroves have been planted as part of an assisted mangrove colonisation initiative in the Ajkwa Estuary as part of the tailings management program. PTFI also brings the waste recycling and processing programme to the local communities by reusing and recycling used containers, paper, and other items. PTFI also assists with the collection and recycling of products like aluminium, metals, and batteries in accordance with government regulation22.

http://www.ptfi.com/news/eBK/gen_ebk.asp?ed=20090212

http://www.ptfi.com/reports/files/wtsd2007.pdf

http://www.ptfi.com/environment/pengelolaan_limbah.asp

Education While mainstreaming CSR in business practice is one issue, education on CSR is another matter. The rapid uptake and diffusion of CSR has motivated universities and other higher education institutes to initiate CSR-related degrees and courses. We list below some leading universities in Indonesia which offer such courses and degrees. No

University

City

University of Trisakti

Jakarta

Beyond grey Level pinstripes No Graduate MBACSR

Subjects/ Major/Specialisati on Masters in Management Studies-Corporate Social Responsibility: 1. CSR and sustainable development: Concept, context, and issues 2. Business ethics and governance. 3. Social and environmental accounting. 4. CSR designs and implementations . 5. Qualitative and quantitative research methods.

University of Gajah Mada

Yogyaka rta

University of Sebelas Maret

Solo

Graduate Specialisation in (Master of CSR Policy: Public 1. Industrial Policy) relationship. 2. Industrialisation and environmental protection. 3. Community Development and human rights. 4. Business ethics. 5. Seminars on CSR policies. Doctoral -

University of Indonesia

Jakarta

Additional Information Distinctive features: Case-based teaching method using various CSR cases practised by firms, SME, and Third sector Organisation (TSO, including University, NGO, Foundation, Cooperatives, Association). The programme makes use of AtKisson methods to design CSR programmes. http://www.pasca.tr isakti.ac.id/ http://www.cectusakti.org/news.ph p?Ln=id&Mn=1& A=1&Kd=6 http://www.pasca.u gm.ac.id/id/stprogr am_view.php?pr_i d=17 http://msk.cpps.or.i d/csr.html

A new doctoral training programme started in 2007. University of Indonesia (UI), PA CSR Ltd and Kofi Annan Business School (KABS) initiates Programme

University

City

Beyond grey pinstripes

Level

Institute Bandung No Undergra Technolog duate, y Bandung MBA, Business MSc in School Managem (SSMBent ITB) Source: Database, Business Watch Indonesia

Subjects/ Major/Specialisati on

Specialisation in CSR, integrated in the curricula of the management-related subjects

Additional Information Academic Chair in CSR in UI â&#x20AC;&#x201C; starting in 2009 http://web.bisnis.co m/umum/pendidika n/1id89789.html Since 2003

Publications on CSR in Indonesia As a new discourse in the country, it is heartening to see the increasing number of CSR-focused publications. Below are some of the key publications highlighting the development of CSR discourse in Indonesia. No

Year

2007

2006

2005

[Type]/Title (Indonesian) [Book] "Downing-toearth" of Sustainable Business: Understanding Concepts and Practices of Corporate Social Responsibility. (Membumikan Bisnis Berkelanjutan: Memahami Konsep & Praktik Tanggung Jawab Sosial Perusahaan) [Book] Business Ethics and Corporate Social Responsibility in Indonesia. (Etika Bisnis dan Tanggung Jawab Sosial Perusahaan di Indonesia) [Book] Scrutinising Concepts and Applications of CSR. (Membedah Konsep dan Aplikasi CSR) [Book] Islamic Philanthropy and Social Justice: A Study on Potentials, Traditions, and Utilisation of Islamic Philanthropy in Indonesia. (Filantropi Islam dan Keadilan Sosial, Studi tentang Potensi, Tradisi, dan Pemanfaatan Filantropi Islam di Indonesia) [Journal article] The Sociological Context of Corporate Social Responsibility Development and Implementation in Indonesia. [Book] Critical Understanding of CSR (Kritis Memahami CSR)

Author

Publisher

Keywords

Sonny Sukada, Pamadi Wibowo, Katamsi Ginano, Jalal, Irpan Kadir, Taufik Rahman

Indonesia Business Links

Corporate Social responsibility, public relation, cross-sectoral partnership of government-businesssociety), Stakeholder, risk and benefit of CSR in Indonesia

Bambang Rudito and Melia Famiola

Penerbit Rekayasa Sains

Yusuf Wibisono

Fascho Publishing

Corporate Social Responsibility, triple bottom line, stakeholder

Irfan Abu Bakar and Chaider S. Bamualim

Ford Foundation and Center for Study of Religion and Culture

Potentials, Traditions, Islamic Philanthropy, social justice.

B. Tamam Achda

Corporate Social Responsibility and Environmental Management, 13: 300-305 The Business Watch Indonesia

Community development, sustainability, regulation, corporate social responsibility, dual societies

Henry Heyneardhi

Corporate Social Responsibility, Business malpractices, Power, Corporate Accountability,

Year

2005

2004

[Type]/Title (Indonesian)

Author

Publisher

Keywords Corporate Governance, Stakeholder Engagement, Code of Conduct, Certification -

[Book] Good Corporate Governance, Concepts and Implementations in the Indonesian Context. (Konsep dan Penerapannya Dalam Konteks Indonesia) [Journal article] Corporate Social Responsibility (CSR) in Asia: A SevenCountry Study of CSR Web Site Reporting. Corporate Social Responsibility: Answer to Current Developmental Approach. (Jawaban Bagi Model Pembangunan Masa Kini) [Book] Corporate Social Responsibility

Mas Achmad Daniri

PT Ray Indonesia

Wendy Chapple and Jeremy Moon

Business & Sociiety, 44, 4: 415-441

corporate social responsibility (CSR), CSR salience/profile, Asia, Web site reporting, globalisation, national business systems

Arif Budimanta, Adi Prasetijo, Bambang Rudito

Indonesia Center for Sustainable Development

Jimmy Tanaya

2004

[Book] Mapping of Corporate Social Responsibility (Pemetaan Tanggung Jawab Sosial Dunia Usaha)

Muâ&#x20AC;&#x2122;man Nuryana, Bambang Nugroho, and Bambang Wahyutomo.

The Business Watch Indonesia â&#x20AC;&#x201C; Widya Sari Press Ministry of Social Affairs of Indonesia

2003

Hamid Abidin, Agung Prihatna, and Zaim Saidi.

Piramedia, Ford Foundation dan PIRAC

2003

[Book] Corporate Social PhilantrophyPhilanthr opy: Profile and Distribution Pattern in Indonesia -Survey of 226 Companies in 10 Cities. (Sumbangan Sosial Perusahan: Profil dan Pola Distribusinya di Indonesia: Survei 226 perusahaan di 10 Kota) [Book] Corporate

Corporate Social responsibility, global market, sustainable development, globalisation, community development, stakeholder engagement. Corporate Social Responsibility, Standards, Issues, Implementations, history of Economic thoughts Corporate Social Reponsibility, Case Study, PT Tidar Kerinsi Agung, PT Riau Andalan Pulp and Paper, PT Pertamina (Cilacap), PT Newmont Nusa Tengara, PT Inco, PT Kiani Kertas, PT Berau Coal, PT Freeport. Charity, PhilantrophyPhilanthrop y, corporate citizenship, Community development. Indonesia.

D. Savio

The Business

Corporate Social

Year

2001

[Type]/Title (Indonesian) Social Responsibility

Author

Publisher

Keywords

Wermasubun

Watch Indonesia

Responsibility, Globalisation, Triple Bottom Line, Business Ethics, Stakeholder, Private Sector, Code of Conduct, Accountability, Regulation Corporate social responsibility, Indonesian context, labour aspects, codes of conduct

[Report/Working Melody Kemp Paper] Corporate social responsibility in Indonesia: quixotic dream or confident expectation? Technology, Business and Society Programme Paper, 6, Source: Database, Business Watch Indonesia

The United Nations Research Institute for Social Development (UNRISD)

Concluding remark The notion of CSR has long been linked to sustainability issues both in environmental and social dimensions. While its proponents idealise CSR as the genuine business approach towards sustainability, the opponents suspect CSR as, at the extreme level, a green-washing or, at the moderate level, a marketing tool. Unfortunately, in the Indonesian context the later camp seems to have been able to make the case as it is what happens: CSR programmes being managed by firm’s public relation and as such it strengthens the view that CSR is merely a humane cosmetic to savage the face of the firms. The genuine mandate of CSR, meanwhile, is rooted in its own very name. The actor and benefactor of CSR are the corporate and subsequently issues that are dealt with should be resolved around the corporate, be it directly or indirectly. Corporate has to be held responsible for the exercise of their immense political, social, economic power in its daily operations. This mandate warrants CSR as a tool for mitigating environmental and social damages, putting the society as stakeholder, especially those who are directly and greatly affected by the business operations, as the main beneficiary of CSR. However, this very promise of CSR lays greatly on CSR practices and concept adopted by business society. As impacts of business activities are generally observed in the environmental, economic, and social dimensions, CSR programmes should evolve to mitigate these impacts in these dimensions, specific to its stakeholder. It is imperative, hence, that any genuine CSR programme must be clearly localised. Unfortunately, we do not yet see this to be the case in Indonesia, and perhaps in other parts of the world. No companies even mention CSR as a way to mitigate their negative externalities to environment, social, and economic conditions, although those externalities may have been addressed randomly under the banner of ‘community development’. Worse still, not only the education institutions have not yet shed a light into this matter, the modules and courses they offer remain situating CSR as a generous, humane action of firms, which perhaps is also due to the blurring line between CSR and corporate philanthropy. The non-genuine CSR programme is neither efficient nor effective. According to the ‘risk and return analysis’, programme as such does not provide positive feedbacks to firms in term of business risk minimisation (i.e. license to operate) or increased return (i.e. niche markets and premiums) and thus deemed short-lived and unsustainable. It even endangers the sustainability of CSR programme itself and perhaps the wider business operations. This sort of programmes does not answer problems, mitigate damages, nor deliver its mandate. An old Indonesian proverb, “Jauh Panggang dari Api” – literally ‘the grill too far away from the fire’ –might well reflect this predicament. We have endeavoured here to depict the latest developments of CSR in Indonesia. By no means is this depiction exhaustive. Nevertheless, we hope that this sketch offers a novel perspective of how CSR is being practised in a non-western context. Learning from the Indonesian case, hopefully, will enrich and expand the reader’s horizon as to the dynamics of CSR and thus help explore the potential for guiding the expansion and uptake of CSR so that it can realise its fundamental goals of making business practices more socially accountable and responsible.

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