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Caring corporations? Business and social responsibility in Indonesia

How can transnational corporations (TNCs) be made more socially responsible? This study looks at efforts to change business practices in Indonesia and asks whether corporate social responsibility is relevant to the current state of crisis in the region.

During the past decade, a powerful movement to improve the social and environmental performance of large corporations and their affiliates and suppliers in developing countries has emerged. New research by the United Nations Research Institute for Social Development looks at how effective this approach has been in the case of Indonesia.

While some would argue that corporate social responsibility (CSR) paves the way for political development, the report contends that any effective implementation of CSR requires the machinery of an effective democratic government and civil society. The report also contains a critique of the Codes of Conduct, particularly as they relate to working conditions.

Management is a new and emerging skill in Indonesia. The type of process-oriented cultural change within an organisation, which CSR requires, infers high levels of skill and an active consultative process between equals. However, Indonesian business and management structures in both TNCs and domestically-owned firms are characterised by a patriarchal, top-down leadership.

In this situation, the study finds that:

Some tentative steps have been taken by the government and by a few TNCs to improve their environmental performance.
Some government-led voluntary initiatives related to pollution control have attempted to motivate change by naming, praising and shaming corporations.
Those corporations that appear to have adopted the language of corporate responsibility are generally those (such as mining companies) that have been put in the spotlight by international civil society activism.

The current transformation is bringing instability, fear and violence to Indonesia. In such a context, it is hard to consider something as abstract as CSR. While concepts such as governance and CSR are fashionable, generating a new language and teams of experts, Indonesia’s difficulties are perhaps more basic and to do with simple national survival. The study offers the following suggestions regarding policy:

CSR may not have anything more to offer Indonesia than what could be offered by overall structural reform.
It is timely to begin to put into place the institutions, educational foundations and management training which are needed for business and political reform, and from which CSR may be a spin-off.
Any broader application of CSR needs to stem from an indigenous belief in the necessity of such an institution and not represent a mere shrug to another Western fashion.
The somewhat piecemeal approach of the CSR movement should alert global citizens to the need for a more systematic strategy.
The after-shock of the Indonesian economic crisis may make way for the type of longer-term pragmatic and visionary thinking required by genuine CSR and supported by Islamic business principles.
There is a danger that CSR and voluntary initiatives may be a diversion from the real issues of law reform and multi-level political and social development.

Source(s):
‘Corporate Social Responsibility in Indonesia: Quixotic Dream or Confident Expectation?’ Technology, Business and Society Programme Paper, Number 6, United Nations Research Institute for Social Development by Melody Kemp, 2001 Full document.

Funded by: The MacArthur Foundation

id21 Research Highlight: 24 January 2003

Further Information:
Melody Kemp
16 Dilkera St
Balmoral
Brisbane, QLD 4171
Australia

Tel: +61 7 38990950
Contact the contributor: musi@magma.ca

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