Interview: CSR in Indonesia — Success Amidst Challenges
“To change the way people think,
it is imperative that we spread a correct understanding of CSR. “
Interviewee: Ms. Maria R Nindita Radyati
Executive Director of CECT & Founding Director of MM-CSR Trisakti University
Interviewer: Takeshi Nozawa
What do you know about Indonesia? It’s a rapidly growing country with an emerging population and market. Natural resources are abundant there, but facing rapid depletion. My interest in Indonesia is that it’s the first country to mandate that companies implement community programs.
I visited Ms. Maria during my stay in Jakarta, to learn more about how corporate responsibility is progressing in Indonesia.
Q1. What is the current state of CSR in Indonesia?
Here in Indonesia, legal regulations require both state-owned and private companies to fulfill “CSR” (although the word itself is not used in the law).
State-owned companies are required to allocate 4% of their net profit by the Law for State Owned Companies No.19, passed in 2003. Half of this amount is designated for use in “Partnership Programs,” in the form of low-interest loans to micro-, small- and mid-sized enterprises, while the other half is dedicated for “Environment Development Programs,” which includes a wide range of activities from garbage collection to planting trees, as well as health and education programs.
Meanwhile, private companies have a mandatory requirement through the Law for Private Limited Companies No. 40, passed in 2007. The intended targets of this law are extractive companies, but language in the law referring to “all companies that creates impact on natural resources” seems to indicate that it is talking about all companies. Companies are required to organize social and environmental programs, and allocate a budget for these activities. This is reinforced in new regulations that established the responsibility of the Board to plan these activities, and which require annual reporting.
Q2. What was the impact of these laws?
The point is that these laws focus only on external responsibility. Although the internal aspects are just as important, it’s too late — the law for state-owned companies, especially, makes people think that CSR means setting net profits aside. CSR is just giving money as well as conducting philanthropy and community development programs.
It is true that a positive impact exists. State-owned companies have provided many loans to the community. But project management is not good in many cases. Resources are not effectively used, and what’s worse is, it creates dependency. The community becomes dependent on CSR. The government perceives CSR as another source of funding. And although the percentages differ, many regulations are established by local governments following the national rule which put net profits aside.
Q3. How can we change the current situation?
To change the way people think, it is imperative that we spread a correct understanding of CSR. This is one of the reasons I established the master course specializing in CSR in Trisakti University.
Students are mainly from company management. Our teaching staff are experts in CSR, risk management, and social enterprise. I believe bringing knowledge and people together from different sectors is important to create real impact. Usually, because their languages and fields are different, they think that they can’t meet. But here, they can connect with each other and learn how to collaborate.
Q4. How do you see Japanese companies?
Japanese companies are practicing good internal CSR. It’s almost perfect. However, they have more to do when it comes to external CSR. They perceive community activities as unimportant. They need to reconsider the way they think from the viewpoint of risk management.
Let’s think about the case of building a factory. If you buy land, that means you are taking away the livelihood of local residents. Compensation by giving them money is not a solution, because it’s only one time. Land can grow food, but money can’t grow. Local community demands jobs from the company, continuously. And once the company fails to fulfill this demand, they will protest.
Sustainably empowering communities through development programs is indispensable. In order to be successful in this, companies should take into account the context of our society: understanding that the ethnicity and culture of Indonesia is really diverse.
Thank you for the insightful discussion and delicious Nasi Goreng!