CSR and Value Creation in Indonesia
    Category: Column By : Stephanie Portier Read : 1895 Date : Sunday, January 12, 2014 - 06:08:39

    My arrival in Indonesia coincided with the adoption of Law Number 40/2007 on Limited Liability Companies, and of its article 74 about Corporate Social Responsibility (CSR). According to this law and for the very first time, a country was making CSR compulsory. Highlighted by the government, it was to become a hot topic as companies have to allocate part of their revenue to CSR practices.

    The goal of the CSR policy is to reconnect companies to civil society, getting them involved in sustainable development. This policy encompasses three different fields—economic, social and environmental. The target is to create long-term financial value for companies, to respect all stakeholders and not just the shareholders, and to preserve the environment. When the law was promoted in Indonesia, companies found many different ways to adapt, but not all of them had the same effects. 

    Indonesian companies are familiar with the concept of philanthropy. Therefore, many of them decided to dedicate part of their resources to activities that were linked to charity, for example developing education in cooperation with NGOs. When I started to study those initiatives, it was unclear: basically, many companies whose business had few links with education or children's rights were injecting funds into educational programs. While education should be allocated money, I felt that, by using their funds to solve issues that were disconnected from their own expertise that these companies were missing the strategic opportunities that comprehensive CSR programs could provide them with.

    Philanthropy is like a slice of the much bigger cake that can be called CSR. Nowadays, the possibilities to innovate in the field of CSR are endless and they can allow a company to seize opportunities and to create competitive advantages, to stand out, to mitigate the risks, to create value, to retain talents and, sometimes, to make money. It is possible to envision CSR capabilities within every kind of operation of every kind of company, from marketing to procurement and sales. It encompasses questions as various as rethinking valuations of companies, finding a balance between personnel productivity and well-being, protecting the environment and developing communities. 

    Some steps should be followed to think about proper CSR strategies. First, companies have to define what kind of value they want to produce. In other words, does a 100 rupiah coin spent on the same CSR program have the same impact for all companies? Instead of doing what is fashionable or trendy in CSR, management should carefully analyze the strategic outputs of their CSR investments.

    Secondly, does a 100 rupiah coin spent on different CSR programs within the same company have the same consequences? Of course it can vary, and companies can seek to classify programs that could have the most impact for them by following a set of established criteria.

    Finally, what if this 100 rupiah coin enabled the company to save 150 rupiah and to improve its image? The answers to these questions suggest that legal obligations can be an open door for companies to successfully evolve and to create more value for themselves while fulfilling their CSR as well.