CSR CSR ININ IINDONESIANDONESIA: :

NNEWEW EETHICSTHICS ININ THETHE MMAKINGAKING

A Brief Introduction to CSR in Indonesian Context

DDRIVERSRIVERS FORFOR SOCIALSOCIAL RESPONSIBILITYRESPONSIBILITY

Economic

DriversSocial Drivers

Political

Drivers• Company image and

reputation as

competitive

• Social license

• Social inequalities

lead to social

• New legal and

regulatory

framework

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endracompetitive

advantage

• Improved risk

management

• Pressure from new

breed of customers

and investors

lead to social

tensions in certain

areas

• Environmental

destruction & climate

change

• Demographic change

framework

• Political pressure

both domestically

and globally

• More standards and

requirement

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IINDONESIANNDONESIAN CCONTEXTONTEXT

� Uncontrolled decentralization (more than 490 districts/cities)� Lack of capacity of government officials & decision makers

� Lack of institutional set up lead to unaccountable development practices

� Low government spending lead to unfavorable business

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� Low government spending lead to unfavorable business climate

� High cost political process contribute to higher cost economy

� Regulatory Framework� Law 25/2007 on Investment

� Law 40/2007 on Limited Company

� Law 4/2009 on Coal & Minerals 3

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TTRANSACTIONRANSACTION CCOSTOST

15

20

25

30

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10

15

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Polisi Aparat Militer PEMDA Organisasi Kemasyarakatan Preman

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CCONTRIBUTIONONTRIBUTION OFOF CCOMPANYOMPANY10/11/2014National BudgetTax, Royalty,

Retribution

Local Tax,

Allocations

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Company Local Budget

Community

Local Tax, Royalty,

Retribution

CSR

National Program

Public Service, Development

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CSR CSR DEFINITIONDEFINITION

� Corporate social responsibility is a commitment to improve community well-being through discretionary business practices and contributions of corporate resources (Kotler)

� Operating a business in a manner that meets or exceeds the ethical, legal, commercial, and

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endraor exceeds the ethical, legal, commercial, and

public expectations that society has of business (Business for Social Responsibility)

� The willingness of an organization to incorporate social and environmental considerations in its decision making and be accountable for the impacts of its decisions and activities on society and environment. (ISO 26000).

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CSR CSR DEFINITIONDEFINITION: K: KEYEYWWORDSORDS

Commitment

The way of doing

businessResponsibility

of the

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Stakeholders &

Environment

Commitment & decision making

of the decision & activities

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MMAINAIN EELEMENTSLEMENTS OFOF SSOCIALOCIAL

RRESPONSIBILITYESPONSIBILITY DDEFINITIONEFINITION10/11/2014

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Sustainable development & welfare of

society

Expectations of

stakeholders

Compliance with law and international

norms

Integrated throughout organization

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4 L4 LAYERSAYERS OFOF SSOCIALOCIAL RRESPONSIBILITYESPONSIBILITY

1. Social responsibility as philanthropy activities

2. Social responsibility as risk management

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management

3. Social responsibility as mutual business development

4. Social responsibility as strategic business practices 9

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CSR CCSR COREORE IISSUESSSUES10/11/2014

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GenericSocial Issues

Social issues that are not significantly impacted by the

Value Chain Impacts

Social issues that are significantly impacted by the company’s

Competitive Context

Social issues in the company’s external environment that

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company’s operations, nor materially affect its long term competitiveness

by the company’s activities in the ordinary course of business

environment that affect the underlying drivers of competitiveness in the locations where the company operates

Strategic CSR

Inbound

Logistics(e.g. Incoming

Operations Outbound

Logistics

Marketing

& Sales

After-Sales

Service

M

a

rg

i

n

Support

Activities

Firm Infrastructure(e.g. Financing, Planning, Investor Relations)

Procurement(e.g. Components, Machinery, Advertising, Services)

Technology Development(e.g. Product Design, Testing, Process Design, Material Research, Market Research)

Human Resource Management(e.g. Recruiting, Training, Compensation System)

Value

What

buyers are

willing to

payInbound

Logistics(e.g. Incoming

Operations Outbound

Logistics

Marketing

& Sales

After-Sales

Service

M

a

rg

i

n

Support

Activities

Firm Infrastructure(e.g. Financing, Planning, Investor Relations)

Procurement(e.g. Components, Machinery, Advertising, Services)

Technology Development(e.g. Product Design, Testing, Process Design, Material Research, Market Research)

Human Resource Management(e.g. Recruiting, Training, Compensation System)

Inbound

Logistics(e.g. Incoming

Operations Outbound

Logistics

Marketing

& Sales

After-Sales

Service

M

a

rg

i

n

Support

Activities

Support

Activities

Firm Infrastructure(e.g. Financing, Planning, Investor Relations)

Procurement(e.g. Components, Machinery, Advertising, Services)

Technology Development(e.g. Product Design, Testing, Process Design, Material Research, Market Research)

Human Resource Management(e.g. Recruiting, Training, Compensation System)

Value

What

buyers are

willing to

pay

• Financial reporting practices• Governance & transparency• Lobbying for policy change• Stakeholder engagement

• Relationships with universities

• Ethical research practices (e.g. animal testing, GMOs)

• Procurement & supply chain practices

(e.g. bribery, child labor, conflict diamonds, pricing to farmers)

• Education & job training

• Safe working conditions

• Diversity & discrimination

• Health care & other benefits

• Compensation

• Layoffs

• Product safety

• Conservation of raw materials

• Recycling

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(e.g. Incoming

Material

Storage, Data

Collection,

Service,

Customer

Access)

(e.g. Assembly,

Component

Fabrication,

Branch

Operations)

(e.g. Order

Processing,

Warehousing,

Report

Preparation)

(e.g. Sales Force,

Promotion,

Advertising,

Proposal

Writing, Web

site)

(e.g. Installation,

Customer

Support,

Complaint

Resolution,

Repair)

Primary Activities

(e.g. Incoming

Material

Storage, Data

Collection,

Service,

Customer

Access)

(e.g. Assembly,

Component

Fabrication,

Branch

Operations)

(e.g. Order

Processing,

Warehousing,

Report

Preparation)

(e.g. Sales Force,

Promotion,

Advertising,

Proposal

Writing, Web

site)

(e.g. Installation,

Customer

Support,

Complaint

Resolution,

Repair)

Primary Activities

(e.g. Incoming

Material

Storage, Data

Collection,

Service,

Customer

Access)

(e.g. Assembly,

Component

Fabrication,

Branch

Operations)

(e.g. Order

Processing,

Warehousing,

Report

Preparation)

(e.g. Sales Force,

Promotion,

Advertising,

Proposal

Writing, Web

site)

(e.g. Installation,

Customer

Support,

Complaint

Resolution,

Repair)

Primary Activities

to farmers)

• Use of particular inputs(e.g. fur)

• Utilization of natural resources

• Transportation impacts

(e.g. greenhouse gases, congestion, logging roads)

• Emissions & waste• Biodiversity & ecological impacts

• Energy & water usage

•Worker safety &

labor relations

• Hazardous materials

• Packaging disposal(e.g. McDonalds

Clamshell)• Transportation impacts

• Disposal of obsolete products

• Handling of consumables(e.g. motor oil, printing ink)

• Customer privacy

• Marketing & advertising(e.g. truthful advertising,

advertising to children)• Pricing practices(e.g. antitrust practices, pricing to

the poor)• Consumer information

• Privacy

CSR CSR FIELDFIELD GUIDANCEGUIDANCE

�Development for community >>> development withcommunity >>> development bycommunity

�Activity based >>> output based

10/11/2014

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endra�Activity based >>> output based

>>> outcome based

� Problem based VS Asset based;

�Want VS Need;

� Individual >>> family >>> community >>> society including government

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GGOODOOD PPROCESSROCESS LLEADEADTOTO GGOODOOD CSRCSR

� Choosing the right implementing partner

� Sharing roles and responsibilities among key stakeholders: company, implementing partner, government, community

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endraimplementing partner, government,

community

� Participatory planning

� Participatory and transparent monitoring-evaluation

� Joint resources

� Collective action

� Reporting on activities 13

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10 P10 PRINCIPLESRINCIPLES FORFOR GGOODOOD CSR CSR ((EXTRACTIVEEXTRACTIVE INDUSTRIESINDUSTRIES))

1. Implement and maintain ethical business practices and sound systems of corporate governance

2. Integrate sustainable development considerations within the corporate decision-making process

3. Uphold fundamental human rights and respect cultures,

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3. Uphold fundamental human rights and respect cultures, customs and values in dealings with employees and others who are affected by company activities

4. Implement risk management strategies based on valid data and sound analysis

5. Seek continual improvement of health and safety performance

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10 P10 PRINCIPLESRINCIPLES FORFOR GGOODOOD CSR CSR ((EXTRACTIVEEXTRACTIVE INDUSTRIESINDUSTRIES))

6. Seek continual improvement of environmental performance

7. Contribute to conservation of biodiversity and integrated approaches to land use planning

8. Facilitate and encourage responsible product design,

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8. Facilitate and encourage responsible product design, use, re-use, recycling and disposal of our products

9. Contribute to the social, economic and institutional development of the communities in which company operate

10. Implement effective and transparent engagement, communication and independently verified reporting arrangements with company’s stakeholders

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GGUIDANCEUIDANCE ONON IIMPLEMENTINGMPLEMENTING SSOCIALOCIAL

RRESPONSIBILITYESPONSIBILITY

Commitment & strategic decision

Understanding the context -

baseline

Participatory CSR Planning

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Institutional set-up & Partnering

Effective Execution

Participatory Monitoring Evaluation

Communicating CSR 16

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THANK YOUTHANK YOUTHANK YOUTHANK YOU

Riza PrimahendraJl. Pulo Asem Utara A20 Rawamangun Jakarta 13220

Fax: 021-4719005

Cell: 0816865164

email: rizaprimahendra@yahoo.com, rizaprimahendra@gmail.com