Okty Damayanti (right) receiving an award for Adaro Energy at the 10th Annual Global CSR Summit and Awards on April 19 in Lombok, West Nusa Tenggara. (Photo courtesy of Pinnacle Group)

How Much Do CSR Programs Contribute to Society?


APRIL 27, 2018

Lombok. Today's increasingly socially conscious consumers are creating a ripple effect that translates into behavioral and societal changes, which influence the way businesses operate, consequently demanding companies to reevaluate the impact they can and are ready to make through corporate social responsibility programs.

A 2015 study by Cone Communications and Ebiquity on the attitudes, perceptions and behaviors global consumers have towards CSR found that 91 percent of expected companies to go beyond profit-making, act responsibly and address social and environmental issues.

According to the study, 71 percent of global consumers are willing to pay more for a socially or environmentally responsible product.

In short, a company's CSR approach can no longer be a gimmick, and may even be key to its survival in competitive markets.

Speaking at the 10th Annual Global CSR Summit and Awards in Lombok, West Nusa Tenggara, on April 19, Ocean Recovery Alliance founder Doug Woodring argued that companies can and need to drive change.

"You have to step up the game … brands are mostly commoditized these days [so] they should be changing to pursue the agenda of what consumers want and not what the brands think they want," Woodring said in his keynote address.

He noted that technology will increasingly play an important role and should be utilized in CSR programs to help solve some of the world's greatest environmental problems.

An estimated 1.3 million tons of plastic waste is produced daily across Indonesia, making it the second-largest marine plastic debris polluter in the world after China. While the government has sought to address the issue through various means, the role of the private sector and nongovernmental organizations will also be imperative to tackle the issue.

In the future, CSR programs may help address challenges the world faces while fostering multi-stakeholder partnership that make those initiatives even more effective.

On the other hand, the relationship between a company's CSR commitments and consumer attitudes must also be guided by good communication on the results of their initiatives, the 2015 study showed.

The study also found that 90 percent of consumers would prefer to switch brands to one associated with a social or environmental cause.

A panel discussion during the 10th Annual Global CSR Summit and Awards in Lombok, West Nusa Tenggara, on April 19. (Photo courtesy of the Pinnacle Group)

Companies and Their Social Programs

Andy Budiarto, technical, environment and corporate responsibility manager at independent power producer Jawa Power, said his company's CSR programs center on educating, empowering and generating income for the local community in Probolinggo, East Java, where the plant is located.

The company's renewable energy development program for example, seeks to produce biogas from cow dung that can be used for cooking or fueling lamps.

"Every family has at least two cows, but waste is a problem and they don't know what to do with that. Normally, they just throw it in the garden or river, which pollutes the surrounding area," Andy said.

In 2013, Jawa Power began building biogas units for residents, each with the capacity to convert the waste from a maximum of six cows to biogas. The gas can be used as a source of cheap and clean energy, while also helping to reduce pollution.

The company had built 470 biogas units in 26 villages in Probolinggo district by 2017, helping to reduce greenhouse gas emissions by 8,492 tons annually.

According to Andy, the biogas process also adds value to the cow dung, as it is turned into a nutrient-rich slurry that can be used as organic fertilizer.

Jawa Power received a silver award for the best community program during the summit.

For Adaro Energy, an Indonesian mining and energy company, the issue of sanitation is one of the highlights of its CSR program.

Adaro's community-led total sanitation (CLTS) program was launched at the location of its main operation in Tabalong, South Kalimantan, in 2012 where more than 60 percent of the community did not have access to proper sanitation and clean water.

In that same year, Adaro recorded nearly 9,500 cases of diarrhea resulting from infections caused by the practice of open defecation.

Citing its commitment to the United Nations Sustainable Development Goals on clean water and sanitation, Adaro's head of CSR, Okty Damayanti, said the program is a collaboration by nongovernmental organizations, the district government and private companies.

The CLTS program includes training 50 sanitarians and around 300 health care workers.

"These health care workers are humble housewives we trained to become experts in sanitation, and they are now very confident and proud to talk in public. [They have become] agents of change," Okty said.

As a result, the practice of open defecation has been eliminated in 43 villages comprising around 8,000 residents in three South Kalimantan districts.

In an interview with the Jakarta Globe on the sidelines of the summit, Okty said sustainability is an important criterion for Adaro's CSR programs.

Okty Damayanti, right, accepting an award on behalf of Adaro Energy during the summit. (Photo courtesy of Pinnacle Group)

"Sustainable initiatives are a must for Adaro. We want the recipients to be empowered, so we will initiate a program, provoke the communities in a positive way, and once they are independent, we will step away," Okty said. She added that the company's programs are designed to ensure beneficiaries do not become dependent.

Adaro won this year's platinum award for best environmental excellence and CSR leadership, and a silver award for excellence in provision of literacy and education.

The company's CSR initiatives also touch on other issues, including education and economic empowerment.

Adaro Indonesia, one of the company's subsidiaries, has allocated Rp 28 billion ($2 million) towards its CSR programs this year, compared with last year's Rp 24 billion.

"At the Adaro Foundation, we have a CSR budget of Rp 10 billion for this year, but this is just two of many companies under Adaro Energy," Okty said.

Since coal is a dirty source of energy, it usually means the impact of responsible initiatives by a coal-mining company such as Adaro are arguable.

However, Okty said Adaro is committed to good mining practices, which include safety, reclamation and energy conservation.

"CSR is embedded in the company's mission [principles], one of which aims to support development of the country and its people," she said.

Andy of Jawa Power added that a commitment from the top is crucial when conducting CSR programs.

Legal Requirement

A 2012 government regulation on corporate social and environmental responsibility makes it mandatory for companies operating in Indonesia to have CSR programs.

Though the regulation specifically applies to "natural-resource-based and natural-resource-related" companies, corporate entities in other business sectors also adhere to the CSR regime.

The Case of India

In 2013, India became the first country in the world to pass legislation on CSR, compelling companies operating in the country with revenues of more than $131 million to apportion at least 2 percent of their net profit on social development and the environment.

However, Ashish Sachdeva, founder of the Green Dream Foundation, a Delhi-based environmental organization, said during the summit that the legislation still lacks enforcement.

He also noted that changes are still needed to ensure companies do not address identical issues, as this would help them be more effective in achieving the desired outcomes. He also stressed the importance of partnerships.

"It's not really one person, government, corporation or NGO. It's an inclusive process; that's why all of them have to work together to make an impact," Sachdeva said.