Changing expectations on CSR in Asia

The Jakarta Post ,  Jakarta   |  Wed, 11/21/2007 11:31 AM

Chrysanti Hasibuan-Sedyono, Contributor, Jakarta

A month ago the Asian Development Bank Institute (ADBI) invited a number of senior corporate and government officials from selected ADB developing member countries as well as business organizations and industry leaders to a regional conference in Tokyo entitled: Enhancing CSR in Asia.

ADBI has apparently realized that the debate around CSR is gaining momentum and is increasingly relevant for the economic development of the Asia-Pacific region and that governments need to prepare a conducive legislative and administrative environment to support and accelerate the CSR initiatives by the private sector in Asia.

Since the early 2000s, discourse on CSR in Asia has been progressing rapidly. Governments, companies and civil society are all evolving different ways of seeing corporate behavior.

The most notable change that has occurred is that governments have shifted from a discourse about voluntary CSR initiatives to legislating CSR.

Indonesia is regarded as a pioneer in this matter. As a speaker on CSR in Indonesia in the conference, the writer was impressed as well as annoyed to learn that Indonesia has gained fame as the first nation to pass legislation requiring limited liability companies to implement a CSR program.

Malaysia, which has put a CSR framework in its Bursa Malaysia and Prime Minister Abdullah Badawi's 2007 budget speech, is expected to follow suit.

It is interesting to learn what is happening in China, which, together with the Netherlands and Thailand, was visited by some of our legislators in their comparative study before our House of Representatives made the controversial decision to pass legislation on CSR.

A very senior official of the Chinese government and a director of CSR Asia consultancy firm, in separate sessions stated that the Chinese government was committed to promoting and advocating CSR by improving its legal framework and providing ""administrative"" and ""economic"" incentives.

The government as well international organizations, NGOs, the media and the private sector have achieved remarkable progress in disseminating the CSR concept among Chinese companies. The Chinese government has been serious about it because it considers CSR important for the establishment of a harmonious society.

Thailand is another country where the government is serious about promoting CSR. The Stock Exchange of Thailand initiated the SET CSR awards in 2006 and established a CSR institute a year later. At the same time, Thailand's Securities and Exchange Commission set up a working group to promote CSR and to establish CSR guidelines for Thai companies.

After a debate on the idea of formulating legislation on CSR, the working group finally decided to encourage companies to carry out CSR on a voluntary rather than obligatory basis.

The government, though not requiring companies to implement CSR programs, has been active in encouraging companies to carry them out. The Labor Ministry has established a Thai labor standard to help Thai companies meet the expectations of international customers, while the Ministry of Social Welfare and Human Security has formed centers devoted to CSR and volunteerism.

The Vietnamese government is also active in promoting CSR, by sponsoring training for companies to get certification such as SA 8000 and convincing them that CSR would increase their competitive advantage in the global market.

After intensive discussions, the participants of the conference identified a challenge: What can policy makers do to enhance CSR without making it regulatory?

As far as the corporate sector is concerned, there has been an increasing awareness in the sector that compliance is no longer an option. A license to do business means, in a growing number of cases, that companies are expected to do more than fulfill the minimum requirements. Along with this is an expectation from communities of more engagement by companies that do business and profit from them. This is generally a positive move, but it also risks reducing CSR to a sort of matchmaking position whereby CSR consultants match companies with money with NGOs with development projects.

Civil society in Asia has shown an increasing interest in CSR, while becoming increasingly skeptical, and has started to hold companies accountable, particularly to CSR pronouncements made in the countries in which they are headquartered. Questions raised include,""is it for your stakeholders back home or local stakeholders?"" And finding in many instances that CSR in Asia is wanting some ask, ""so you are practicing one policy, but two standards"". Yet for companies that do want to engage with NGOs, in many Asian countries there is a profound lack of capacity and ability to provide the kind of expertise companies want.

Finally, multilateral organizations like the ILO, UNESCAP and the World Bank are increasingly seeking to engage with the corporate sector on CSR. One successful example is the UN Global Compact initiated by former UN Secretary General Kofi Anan which to date has 4,775 signatories, 70 of which are from Indonesia, who support 10 principles in the area of human rights, labor, corruption and the environment.

Another example is the Equator Principles developed by the World Bank's International Finance Corporation (IFC), a code of conduct to ensure that large projects, of over US$50 million in capital, financed by signatory organizations be developed in a manner that is socially responsible and reflects sound environmental management practices. Thirty of the world's largest banking groups, with the majority active in Asia, accounting for about 75 percent of global projects financing have signed on to the Equator Principle.

The challenges and opportunities arising from these changing expectations on CSR in Asia are numerous, but one key issue is for companies to determine what stakeholders want. Dialog with stakeholders is starting to emerge in the region, and partnerships based on that dialog are slowly starting to happen. This is also happening in Indonesia, albeit slowly, because often the distrust between a company and its stakeholders is quite profound. However, with goodwill and sincerity from all parties, an intelligent and meaningful conversation would be possible, hopefully followed by a partnership that is mutually beneficial.

The writer is a lecturer on business at various universities and vice chairperson of Indonesia Business Link (IBL).Indonesia Business Links.

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