Thursday, September 02, 2010 22:31 PM
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The concept of corporate social responsibility (CSR) has been recognized since the early 1900s and has been increasingly growing in business circles all over the world, including in Indonesia.
Many corporations voluntarily practice CSR for several reasons. In the local context, first, a corporation has a specific intention, which is illustrate to communities and governments that the corporation cares about communities living close to its operations. Second, by doing “good” for the communities and the environment it will scale up product marketing, resulting in more profit. Third, it can be used as a show window to demonstrate to shareholders and societies that the corporation is a good citizen. Fourth, it will support the sustainability of the business in the long term.
In the global business context, concern for communities and the environment is able to increase share prices and results in more demand in share trading. Moreover, the corporations’ brand image could be well-recognized, regardless of any negative actions by the corporations.
In Indonesia’s forestry sector, the practice of CSR has been long recognized, but its name was different. In 1991, the Forest Village Development Program was introduced with the issuance of Forestry Ministry Decree No. 691/1991. Under this decree, forest concessionaires are obliged to include communities in their management in terms of carrying out community development for those residing in and around the concession area. The aim of this policy was mainly to improve local communities’ welfare as well as enhance the quality of forest resources, which were recognized as being severely degraded. The degree stated that concessionaires who did not comply should face sanctions, and that the government should cease all assistance and services in relation to forest management activities by the concessionaires.
Those appointed to be responsible for the proper implementation of the above regulation were the head of Provincial Forestry Office and head of the Provincial Forestry Service. Both offices have slightly similar obligations but different responsibilities. The first office is responsible for developing community development activities and the second is in control of field implementation. However, guidelines, criteria and indicators on the obligations of concessionaires have apparently not been issued.
Therefore, it is not clear how to control the implementation of the Forest Village Development Program, to what extent the program has improved people’s livelihoods or what sanctions concessionaires face if they do not comply.
CSR is viewed by many corporations as a way to get closer to local communities, in which to some extent both parties by nature have a distant relationship. From a corporation’s perspective, the goal of its business operations is to make a profit and achieve targets, while taking care of communities may be viewed as a waste of time and resources. Communities, on the other hand, see corporations taking natural resources, including the forests that they depend upon either for food or income generation. In addition, forests are also used by some local societies to provide shelter in which family members can stay safely.
With these contradictory points of view, a compromise can be reached through the practices of CSR. Both parties are expected to achieve a win-win solution, without any intervention by a third party.
Corporations can focus on their businesses without any disruptions from communities living in the surroundings, and communities can take advantage of the existing operations of corporations as the corporations can provide job opportunities, infrastructure, capacity building and other benefits for the communities.
In South Kalimantan, in particular Jorong sub-district, corporations contribute to communities through a range of assistance, such as job opportunities prioritizing local people, building schools and mosques, establishing water treatment plants, providing scholarships for bright primary school students and various training to improve people’s skills (such as for mechanics, carpenters and developing a homemade food business).
To maintain relations, corporations regularly communicate with communities to identify what they need and to develop relations that cultivate mutual benefits.
By nature, this relationship is increasingly growing without intervention from the either the central or local government. It seems that third party involvement would to some extent ruin the developed relationship. Such as with the enactment of Law No. 40/2007 on limited liability companies, the government inserted a particular article that corporations should apply social and environmental responsibilities in their business management (Article 74, http://www.bpkp.go.id/unit/dan/uu40-2007-pt.pdf).
As explained above, relations between communities and corporations can develop naturally due to expectations on the part of many corporations. Therefore, the relations should not be disturbed by any other party, including the government.
The issuance of Law No. 40/2007 requires corporations to implement social and environmental responsibilities, particularly corporations working in the field of natural resources extraction. This has been understood to enforce corporations to apply those responsibilities, even though without any enforcement, corporations will voluntarily apply CSR.
Further questions need to be clarified, such as when a government regulation detailing social and environmental responsibilities will be issued (Article 74[4]), what kind of sanctions the government will apply if corporations do not abide by the Law on Limited Liability Companies, including how to monitor and control these obligations, and whether there is a guarantee that government officials will not use this article to “play” with corporations.
The insertion of this article would provide a new opportunity to unearth money legalized under the Limited Liability Company Law, another form of corruption.
The writer is a PhD student
at Charles Sturt University,
Albury, Australia.
