CSR and the Third Sector: Indonesian Experiences

Bali, November 25, 2011

Noke KiroyanPresident Director and Chief Consultant, KIROYAN PARTNERS

Chairman Board of Patrons, Indonesia Business Links

The 7th International Society for Third-Sector Research Program (ISTR) Asia Pacific Regional Meeting

Responsibility of an organization for the impacts of its decisions and activities on society and the environment, through transparent and ethical behavior that

Contributes to sustainable development, health and the welfare of society;

Takes into account the expectations of stakeholders;

Is in compliance with applicable law and consistent with international norms of behavior; and

Is integrated throughout the organization and practiced in its relationships.

Social Responsibility in ISO 26000

2(Adapted from “ISO 26000: Guidance on social responsibility ,” 2010 )

CHARITYOBLIGATION

OF COMPANIES

PAID FOR FROM

PROFIT, NOT COSTS

SEPARATE FROM

BUSINESS

Common Perception of CSR in Indonesia

• Focus on jobs, profits, and paying taxes with a legal compliance orientation

• Since there is no corporate citizenship strategy, leadership tend to be out of touch with issues and relationships tend to be unilateral

• When issues arise from the societal domain they tend to react defensively and communicate unilaterally

• Companies begin to introduce philanthropy and some degree of environmental management

• Leadership becomes aware of the need for a “social license to operate”

• Still reactive rather than proactive

• Begin communicating with CSOs and NGOs on a project basis rather than systematically and strategically

• Companies begin to pay real attention to stakeholders

• Adopt a more responsive stance to stakeholders with programs based on their interests and needs

• Willingness to engage with CSOs and NGOs that have concerns about the business’ practices

• Willingness to begin being more transparent through public multiple bottom- line reporting

• Companies begin to integrate their business models more holistically with corporate citizenship activities

• Responsibility management

• Leadership begins to understand that reputation crucial to success and that corporate citizenship is integral part in developing reputation

• Incorporate external assurance such as responsibility auditing by outside agencies

• Full disclosure of what is happen-ing within the company including negative information via social reports

• “Changing the game” by creating new ventures or markets that have pro-social benefits

• Engage with wide range of civil society. Governmental and non-governmental enterprises

• Leading on sustainability and business-society relationships

Elementary Engaged Innovative IntegratedTransform-

ing

Stages of Corporate Citizenship and CommunicationStrategies

(“The Paradoxes in Communicating Corporate Social Responsibility,” Sandra Waddock and Bradley K. Googins in “ The Handbook of Communication and Corporate Social Responsibiliy” – Øivind Ihnen, Jennifer L. Bartlett and Steve May [eds.], 2011)

4

5

Social and environmental responsibility is

the commitment of corporations to

participate in sustainable economic

development to improve the quality of life

and the environment in ways that are

beneficial to the corporation itself, the local

communities as well as society at large.

Chapter I Article 1 Paragraph 3

Law No. 40/2007 on Corporations (UU PT)

Chapter V Article 74

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Law No. 40/2007 on Corporations (UU PT)

1) Corporations in the business of and/or whose business relate to natural resources must conduct social and environmental responsibility

2) Social and environmental responsibility as stipulated under paragraph 1) is a corporation’s obligation that is budgeted and treated as costs of the corporation and implemented with due consideration of propriety and reasonableness

3) Corporations that neglect their obligation as stipulated under paragraph 1) will be sanctioned under the prevailing laws

4) Further legislation on social and environmental responsibility will be established in a Government Regulation

7

Law No. 40/2007 on Corporations (UU PT)After more than 3 years, the implementing regulations as stipulated under Article 74 paragraph 4) are yet to be issued, in the meantime various government bodies at central and regional levels are taking matters into their own hands, e.g.:

East Java government preparing Regional Regulation (PERDA) to levy 2.5% of company profits for welfare in the name of CSR

Minister for Improvement of Underdeveloped Regions targets 65% from “CSR funds”

Minister for State-owned Enterprises to draft regulations for “CSR funds” to promote sports and arts

Minister for Home Affairs to draft laws on a forum for management of CSR in the regions under his auspices

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Stakeholder Engagement

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Stakeholder engagement involves dialogue between the organization and one or more of its stakeholders

Stakeholder engagement can take many forms – it can begin as a response by an organization to one or more stakeholders and can take place in informal or formal settings

Stakeholder engagement should be interactive and is intended to provide opportunities for stakeholders’ views to be heard – its essential feature is that it involves two-way communication

(Adapted from “ISO 26000: Guidance on social responsibility,” International Organization for Standardization, 2010 )

Level of Engagement Methods of EngagementConsultLimited two-way engagement: organization ask questions, stakeholders answer

Surveys Focus groups Meetings with selected stakeholder/s Public meetings Workshops Online feedback mechanisms Advisory committees

Negotiate Collective bargaining with workers through their unions

InvolveTwo-way or multi-way engagement: learning on all sides but stakeholders and organization act independently

Multi-stakeholder forums Advisory panels Consensus building process Participatory decision making process Focus groups Online feedback schemes

CollaborateTwo-way or multi-way engagement : joint-learning, decision making and actions

Joint projects Joint ventures Partnerships Multi-stakeholder initiatives

EmpowerNew forms of accountability; decisions delegated to stakeholders; stakeholders play a role in governance

Integration of stakeholders into governance, strategy and operations management

Levels and Methods of Stakeholder Engagement

(“AA1000 Stakeholder Engagement Standard 2011 – Final Exposure Draft,” – AccountAbility, 2011) 9

Est

abli

shm

ent

Mem

ber

ship

Vis

ion

Mis

sio

nToward end 1998, initially in response to the Financial Crisis

Currently sixty domestic companies and sub-sidiaries of multi-nationals in Indonesia

To be a leading advocate of good corporate citizenship in Indonesia and be recognized for it

To contribute towards creation of good corporate citizenship and to develop the capacity of its develop-ment partners, incl. corp-orations, SMEs, government and CSOs

Indonesia Business Links

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Indonesia Business LinksCore Programs

Business Ethics

CSR for Better

Life

Young Entrepre-

neurs Start-up

SME Enabling Network

Youth Eco-

nomic Empow-erment

Other Regular Activities

CEO Network

Bi-annual International

Conference on CSR

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THANK YOU

PT KOMUNIKASI KINERJAMenara Karya, 10th Floor Suite

HJl. HR Rasuna Said Blok X-5 Kav.

1-2Jakarta 12950 – INDONESIA

T: +6221 5794 4694F: +6221 5794 4696

info@kiroyan-partners.comwww.kiroyan-partners.com