CORPORATE SOCIAL RESPONSIBILITY IN DEVELOPING COUNTRIES Yanti Koestoer Executive Director, Indonesia Business Links (IBL)

What is Corporate Social Responsibility (CSR)? Corporate social responsibility is the way companies engage in the community as a strategy that produces long-term benefits for both the community and companies CSR is not only charity but also above all a strategy of doing business

Business motivation for CSR Care for the environment and society, which are the sources of both human capital and raw materials A way of gaining acceptance in the community where a business operates CSR should not be forced on the companies by legislations. It should be instead a voluntary initiative that benefits both the companies and the society.

Misperceptions about CSR in developing countries Because CSR is a new paradigm, there are many misconceptions – More education needed to make sure the correct definition of CSR is adopted CSR is not meant to have communities depend on companies for donations or to take over the roles of government – Firms have limits to what they can contribute – Governments have to do their jobs

Does CSR apply to everyone? CSR is applicable to all companies regardless of their size and sector CSR is not only money but also other contributions such as knowledge, materials, voluntarism CSR is also related to the way companies treat labor and behave in the community CSR does not necessarily have to entail large contributions

Corporate Social Responsibility and Corporate Citizenship in Indonesia The term “corporate citizenship” (CC) was known long before CSR BUT CSR has become a more popular term than CC among the public and in the business community The two terms now explain the same notion of how companies ought to behave as responsible citizens

Basic tenets of corporate citizenship Five areas of good corporate behavior: – Management of human capital – Management of the environment – Accountability and transparency through good corporate governance – Looking after local economic development – Minimizing any possible social conflict with the community

CSR for different types of companies Indonesia Business Links (IBL) is working with over 40 companies committed to CSR Companies adopt CSR in different ways – Multinationals bring CSR practices learned from their home countries – State-owned companies are mandated by the government to contribute – Local companies make CSR contributions but often do not call it CSR

Examples of CSR in Indonesia Many companies are engaged in education, health services, and environment programs In Indonesia, companies consider human capital as a very important aspect of CSR For a large country like Indonesia, the government needs help from the private sector to deliver all the needed services – Indonesia has 200 million people and more than 13,000 islands

CSR in developing and developed countries Basic understanding of CSR is same in developed and developing countries – BUT developing countries have more areas that need intervention CSR should be based on the local needs CSR is often advanced through public-private partnerships Public-private partnerships that combine government and civil society efforts with private sector initiatives are very effective.

Explaining CSR to businesses Many companies make contributions without calling it CSR – BUT companies have difficulties satisfying all the needs and wishes of the community – They need a better strategy to respond to the needs of the community Companies should see CSR from their own perspective as a part of business strategy that also benefits the community – CSR is about incorporating external and internal aspects of the business operation

Common challenges in applying CSR Companies sometimes create over-expectations of what they can provide Donations may generate social conflicts between the beneficiaries Some companies are skeptical about CSR because they see it as a foreign paradigm CSR is still not understood by some firms as a part of regular business practice The key challenge is to define and explain CSR to those skeptical or unaware of the concept.

Cultivating CSR momentum CSR has gained momentum recently – More government attention on enforcement of social and environmental practices Many governments want to make CSR part of the legal regulations – CSR, however, should go beyond mandatory government regulations and be voluntary Improving CSR and corporate citizenship is a long-term mission

ENDING