Corporate Social Responsibility PRASETIYA MULYA BUSINESS SCHOOL 27 September 2010

AGENDA Corporate Responsibility Pyramid Arguments for and against Corporate Social Responsibility CSR implementation

CORPORATE RESPONSIBILITY PYRAMID PHILANTROPIC RESPONSIBILITIES The corporation’s active involvement in activities that promote human welfare ETHICAL RESPONSIBILITIES Fulfill legal and ethical obligations LEGAL RESPONSIBILITIES Carry out its work in accordance with the law and government regulation ECONOMIC RESPONSIBILITIES (making acceptable profit) Trevino, p.29

EVOLUTION OF BUSINESS’S SOCIAL INVOLVEMENT Social Obligation - obligation to fulfil economic and legal law Avoid do any harm to other people Conform to the law Social Responsiveness: Capacity of an organization to respond to social issues Social Responsibility: It is beyond legal and economic standard, in order to attain long term organization goals To cultivate the wisdom and ability to make the world better (Thomas Mulligan)

SOCIAL RESPONSIBILITY versus SOCIAL RESPONSIVENESS Major Consideration Ethical Pragmatic Focus Ends Means Emphasis Obligation Responses Decision Framework Long Term Medium-Short Term

Arguments For Social Responsibility Public Expectations Long run Profits Ethical Obligation Better Environment Discouragement of further government regulation Balance of responsibility and power Stockholder interest Possession of resources Superiority of prevention over cures

Arguments against social responsibility Violation of profit maximization Dilution of purpose Costs Too much power Lack of skill Lack of accountability Lack of broad public support

Csr IMPLEMENTATION

CSR definition: Company Society Corporate social responsibility is the duty a corporation has to create wealth by using means that avoid harm to, protect or enhance societal assets Company Society

CSR PHILOSOPHY Achieving Balance Social Expectation Business Expectation

CSR CONCEPT “Business commitment to contribute sustainable economic development, working with employees, their families, the local community, and society at large to improve their quality of life” CSR is a commitment to improve community well being through discretionary business practices and contributions of corporate resources

Benefit of CSR Implementation Better management of an ever expanding spectrum of risk Improved reputation Improve innovation, competitiveness and market positioning Improved quality of social relationship to stakeholders by giving added value

Generation of CSR Social responsibility as a philanthropy activities Social responsibility as a risk management Social responsibility as a mutual business development Social responsibility as global ethics practices

Guidance on Social Responsibility ISO 26000 WD 4.2 The Environment Labour Practices Fair Operating Practices Consumers issues Community involvement & development Social Responsibility Organizational Governance Human Rights

ACT NO. 40 OF 2007 Article 7 4: Companies doing business in the field and/or in relation to natural resources must put into practice Environmental and Social responsibility. The Environmental and Social Responsibility contemplated in paragraph (1) constitutes an obligation of the Company which shall be budgeted for and calculated as a cost of the company performance of which shall be due to attention to decency & fairness Companies which do not put their obligation into practice as contemplated in paragraph Shall be liable to sanctions in accordance with the provisions of legislative regulations. Further provision regarding Environmental and Social Responsibilities shall be stipulated by Government Regulation.

Social Issues Supplier: Social issues: Fair competition Good corporate Governance Supplier: Fair competition Bribery Collusion Environmental: Global warming Pollution Lack of energy Environmental conservation Hazardous waste Ecosystem Sustainable resources use Customer: Customer protection Product design Customer complaint handling Mechanism for product recall Education & Awareness Employees: Child labor Discrimination People development Social life Health & safety at work Disable person Labor union Community: Unemployment Poverty Contribution to economic empowerment Community involvement

Principles of CSR In the area of human rights: Support and respect the protection of internationally proclaimed human rights Make sure they are not complicit in human rights abuses.

Principles of CSR In area of labor Uphold the freedom of association and the effective recognition of the right to collective bargaining. Eliminate all forms of forced and compulsory labor Work for the effective abolition of child labor. Eliminate discrimination in respect of employment and occupation.

Principles of CSR In the area of environment Support of precautionary approach to environmental challenges. Undertake initiatives to promote greater environmental responsibility. Encourage the development and diffusion of environmentally friendly technology.

Establishing mutually beneficial relations with our suppliers, Principles of CSR Supplier & Distributor Establishing mutually beneficial relations with our suppliers, customers and business partners.

Corporate Social Responsibility Myth Truth CSR  Kepedulian sosial Kedermawanan Eksternal Ketergantungan pada perusahaan (manja) Dinilai dari Uang Apa mau perusahaan CSR  Peningkatan kualitas hidup masyarakat Kedermawanan  bagian kecil dari CSR Stakeholder (internal & eksternal) Memberdayakan masyarakat mandiri Sejauh mana perusahaan aktif & proaktif terhadap lingkungan Apa mau masyarakat

CSR Through Time 50’s – 60’s Howard R. Bowen, Bapak CSR Social Responsibility of The Businessman “Kewajiban Perusahaan menjalankan usahanya sejalan dengan nilai-nilai dan tujuan yang hendak dicapai masyarakat di tempat perusahaan tersebut beroperasi” Perlunya visi yang melampaui urusan kinerja finansial perusahaan Source : Majalah Investor no.166, 29 maret-11april 2007

Iron Law of Social Responsibility CSR Through Time 60’s Keith Davis Iron Law of Social Responsibility “Semakin besar perusahaan, maka semakin besar pula bobot tanggung jawab yang harus dipertahankan perusahaan itu kepada masyarakatnya.” 80’s Thomas Jones, Pakar ekonomi pembangunan Amerika “Ada korelasi positif antara peran perusahaan dalam merealisaikan tanggung jawab sosial dan peningkatan kinerja keuangan perusahaan tersebut.” Source : Majalah Investor no.166, 29 maret-11april 2007

CSR Through Time 90’s Muncul banyak model-model CSR : CSP ( Corporate Social Performance ) BET ( Business Ethics Theories ) Corporate Citizenship CSR mulai menjadi tradisi baru dalam dunia usaha di berbagai negara. Source : Majalah Investor no.166, 29 maret-11april 2007

CSR Method Cause Branding (Top-Down) Perusahaan menentukan masalah sosial dan lingkungan yang harus dibenahi. Biasanya perusahaan mendesain program sosial yang ada kaitannya dengan branding produk/layanannya sehingga masyarakat lebih akrab dengan merek perusahaan tersebut. Source : Majalah Investor no.166, 29 maret-11april 2007

Venture Philanthropy (Bottom-up) CSR Method Venture Philanthropy (Bottom-up) Perusahaan membantu pihak non-profit dalam masyarakat sesuai apa yang dikehendaki masyarakat. Perusahaan membantu masyarakat untuk mandiri dan tidak sekedar manyalurkan bantuan sosial/finansial kepada masyarakat. Source : Majalah Investor no.166, 29 maret-11april 2007

Six Option Corporate Social Initiatives No Initiatives Description 1 Cause promotion Supporting social cause through promotional sponsorship. 2 Cause related marketing Making a contribution or donating percentage of revenues to specific cause based on product sales 3 Corporate social marketing Supporting behavior change campaigns 4 Corporate philanthropy Making direct contributions to charity or cause 5 Community Volunteering Providing volunteer services in the community 6 Socially Responsible Business Practices Adopting and conducting discretionary business practices and investment that support social causes. Kotler and Lee, 2005