CSR: Enduring benefits for communities and companies alike

Simon G. Bell, Jakarta

The times when Corporate Social Responsibility (CSR) was more of an ad hoc act of generosity when times were good has passed. CSR and community engagement is now an obligation by law in Indonesia.

Although the articles of the law do not specifically state the extent of companies' CSR obligations, the law does state that companies involved or related to the extraction industry will be required to conduct CSR and environmental programs.

The law further states that sanctions will apply to companies who do not adhere to these requirements and that the government will publish further specifications in the near future.

The fact is that many extraction-based companies have been supporting CSR activates in different ways for some time. Most major oil, gas and mining (OGM) companies have committed to supporting local community needs and have dedicated significant resources in order to do so. Companies like Hess Corporation, BHP, Freeport, BP and others have long established CSR programs with enduring positive impact on local communities.

Keeping this in mind, what is important looking forward is that accompanying government regulations allow companies the flexibility and control they need to implement programs that benefit both local communities and the companies investing in CSR programs. It is essential that companies retain the right to direct and manage their CSR programs without interference from government. Without the ability for companies to independently design, implement, monitor and improve their CSR work enduring success is unlikely. This new obligation would then turn into another tax, reducing the competitiveness of Indonesia in the eyes of both domestic and foreign investors.

The challenge for companies is to effectively develop strategies that acknowledge the symbiotic relationship between the welfare of a community and that of an organization. This requires processes and frameworks that help examine opportunities benefiting both the communities and a company.

It is imperative that CSR programs are supported by a business case that calculates the benefits and costs as well as identifying key positive and negative impacts of the program in areas such as the local economy, local entrepreneurial activities, the environment, health and education.

Integrating CSR best practices into key business activities is clearly important. There should not be a separation between the business activities of the corporation and the CSR initiatives. It is also important to have a driving force behind CSR projects. Having the support of senior management technical people, the CSR division and local stakeholders is essential in order to align the different needs and expectations of these groups. It is valuable to engage an independent party to manage the interface between all the stakeholders and to ensure that programs produce the intended outcomes for all parties involved.

Corporations must get their CSR programs right to ensure business continuity and to fulfill their legal obligations. Businesses must evaluate the complex political and economic environments in which they operate before making CSR investment decisions. The relationship and interaction between local governments, NGOs, local business owners, industry associations and other key stakeholders must be delicately handled. Enduring, trust-based relationships are the only way to create long-term positive impact.

Companies must avoid an overly centralized approach which is too rigid to be practical and beneficial. Past experience suggests the most successful CSR programs include the following components:

Managed Expectations: Informing local stakeholders as to what they will and will not receive and achieve from participating in a CSR program, as well as outlining program benefits and obligations is a significant success factor.

CSR programs should be managed and controlled by the funding corporation's implementing body. Local industry groups, government, NGO and other key stakeholders should be regularly informed of project achievements and involved in the achievement of key project milestones. Expected levels of commitment need to be clearly communicated and agreed to by all stakeholders at the beginning of the CSR program.

In addition to the above points, in order to maximize the benefits of CSR programs, companies should commit to a number of key internal initiatives at the strategic level such as:

* Aligning CSR strategies and goals with organizational and business strategies and goals.

* Incorporate CSR awareness into the culture of the corporation to ensure that programs endure.

* Actively encourage the company-wide commitment and involvement of employees in CSR programs and the inclusion of CSR key performance indicators for relevant positions.

Under this new legislation, there is an opportunity for government and NGOs to make useful information, needs analysis and other resources available to companies. This will help companies in prioritizing and implementing effective CSR programs.

Furthermore, Companies should look to third-party implementers and partners for support. It is a significant benefit to engage an objective implementing partner to help in aligning the different needs and expectations of management, technical departments, and local communities.

Three areas where CSR initiatives have been proven to create significant and enduring positive impact are SME development, health improvement and education improvement.

Local SME development programs and economic advancement programs that focus on the improvement of business processes and outcomes for small and medium business operating in local communities have offer major employment and economic benefits for communities.

Specialist training, nursing skills and primary healthcare improvement programs as well as hospital infrastructure development in remote locations often make immediate positive impact. This is also the case with health promotion and community awareness programs. All healthcare programs should be aimed at creating sustainable improvement of public health, and should use a participatory approach.

Basic education improvement programs that focus on improving school performance through community participation and development of educators' and parents' skills is another area where CSR programs have been proven successful. by improving community participation, especially from parents, in communities across Indonesia.

CSR benefits both companies and the local communities in which they operate. The challenge now is to give companies the freedom and flexibility to work with their community stakeholders in designing, developing and implementing programs that have enduring benefits for all.

The writer is a senior advisor of The Apex Consulting Group.

He can be reached at simon@apex-cg.com.