COSMETIC VENEER, OR GENUINE CARE FOR THE PEOPLE AND THEIR ENVIRONMENT?

WALHI

A Study of Corporate Social Responsibility (CSR) Practices of Four Natural Resource Extracting Companies in Indonesia

Wahana Lingkungan Hidup (WALHI) and Rainforest Foundation Norway (RFN)
Jakarta 2009

PREFACE

Corporations today praise themselves for their initiatives and implementation of environmental and social responsibility programmes, as we see from their annual reports and website. Business media offer many articles and stories, joining ranks in declaring how well the companies are acting. And also in Indonesia there have been business schools offering special majors in Company Social Responsibility (CSR).

On the other hand, the role of the state is becoming increasingly limited with regard to the civic welfare and social sectors (civil subsidy cancellation, privatization and tax holiday/deduction for corporations in the state budget is deducted for civil welfare). It seems that the government expects corporate programmes to take over such functions.

In the State Palace, at the opening of APINDO (Indonesia Businessmen’s Association) Discussion in March 2008, before the audience of businessmen the president said, ‘. . . in the midst of a situation like this . . . please help the needy people from your CSRs, including for the workers at your company, please lighten their burdens, especially of food price increase.’

For the corporate establishment, basic motives are to create profit for the capital owners or shareholders, and that would make social responsibility programmes contrary to their main objectives. Budget allocations for CSR programmes can be seen by shareholders as a lossmaking activity.

However, environmental and social responsibility can be implemented if it can be incorporated into the company strategy to accumulate profits. Milton Friedman, neo-liberal intellectual and ideologist of corporate interests, has expressed this clearly: ‘A corporation belongs to its shareholders. Its interests are its shareholders’ interests... Nevertheless, there is a situation where CSR can be tolerated... [that is] The executives treat the environmental and social values as parts of the way to enrich the shareholders – and [CSR] is not an aim in itself –such thing can be justified. It is like as putting a beautiful woman in front of a car as sales promotion. This is not then meant to promote her beauty. It is part of the way to sell the car.[1]’ That view is confirmed by Peter Drucker, a teacher of business teachers: ‘If you find an executive who wants to run CSR programmes, expel him immediately.’[2]

And yet, the director of Dairi Prima Mineral was not fired by the stakeholders because he had instigated CSR programmes even before the company began its operations. That was regarded as being in line with shareholder interests, to smooth the way for investment at a location where parts of the local community were opposed. CSR programmes are set in the frame to weaken community objections to the company presence.

The corporation bottom-line is to make a profit for its shareholders. When the organization Doctors Without Borders established treatment programmes for trachoma in Mali in Central Africa, they said ‘No, thank you’ to Pfizer, who offered Zithromax medicine for free, and opted to import a generic version of the medicine. They explained that if Pfizer some day should leave the country, or halt or cut the programmes for whatever reasons, then the charitable organization would not be able to ensure supplies of the medicine for the neediest in the country. ‘If the shareholders change their priorities, or if the media do not publicize AIDS in Africa anymore, what will happen with the people when Pfizer cuts its programme (…)?’3 A similar instance was disclosed in this research, in the case of the Riau civilian empowerment programme (Program Pemberdayaan Masyarakat Riau). PT.RAPP has provided support to the farming and animal husbandry sectors for ten years now, but has recently cut the amounts for what it categorizes as CSR.

The state’s role in ensuring the well-being of its people cannot be changed, and can certainly never be replaced by corporations. With corporations, the shareholder majority has power to decide on policies (what to produce and how to produce), by what is known as ‘one dollar, one vote’. The fewer shares one holds, the less control one has over the corporation. However, no members of the local communities near the corporations hold shares, so they have no formal control over these companies. Concerning the state, however, the people’s position relative to the government is still based on the principle of ‘one man/woman one vote’. The voice of the majority must be noted. Thus, the people enter into a contract with the state/government, where the aim of benefiting the people should be recognized, at least formally. (Central here is Article 33 of the Indonesian Constitution.)

Quid pro quo, give and take. No free lunch from corporations. School, road, and clean- water supply construction is undertaken by corporations such as PT. KPC in its mining area – as a form of compensation for blasting activities and the ensuing environmental destruction. And those have not been done in full compliance with the original agreement. Likewise with the environmental and social responsibility of PT.Newmont Nusa Tenggara: this can be seen as compensation for the environmental destruction caused by the corporation’s throwing its tailings out to sea, a practice forbidden in its home country, the USA. Too high is the price that our people must bear to get awarded the mean ‘lunch’, which only lasts as long as the corporation operates there. The costs the communities have to bear are environmental destruction, income degradation and health impacts, and these are never recorded in the company’s bookkeeping. Economists call them ‘negative externalities’.

The state must regulate the corporation and run its role to benefit its people. If the country does not privatize nor grant tax holidays for the corporations, we will not hear the president Susilo Bambang Yudhoyono (or SBY) begging for the corporation’s CSR to benefit his people.

The system which is meant here is the one in which the country plays a major role in directly benefiting its people, in accordance with the principles of democratization and stronger civilian controls over the country. Instead of corruption, the result will be civilian happiness and wellbeing, with environmental-friendly production methods – the same types of methods that corporation often regard as too expensive.

The corporatocracy system in which the state allies itself with the corporation, serving the corporation in neo-liberal systems must be put to an end. People must be courageous, standing up to seize political spaces, access and control over the living sources. This requires critical awareness on the part of the masses and the development of strong civil society organizations, especially in areas where natural resources are being extracted, so that people can regain control of their livelihoods from corporations focused on profits in the name of economic development.

We wish to express our gratitude to the Core Researcher and the Field Researcher Teams that have worked hard to complete this study of CSR in Indonesia. Through their efforts, may CSR programmes gain wide recognition among the people. Our thanks also to various parties for their direct and indirect support, and last but not least to the Rainforest Foundation Norway, which has so generously supported this research in full.

May you find it beneficial.

Jakarta, April 2009

Berry Nahdian Forqan
Executive Director of National WALHI


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