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Technology, Business and Society Programme Paper 6: Corporate Social Responsibility in Indonesia: Quixotic Dream or Confident Expectation?

8 Mar 2002

  • Author(s): Melody Kemp

Today, in the industrialized West, quite a powerful movement is emerging to improve the social and environmental performance of large corporations and their affiliates and suppliers in developing countries. Using the case of Indonesia, this paper looks at how effective this approach has been. The paper addresses two central questions. First, do corporate social responsibility (CSR) and corporate voluntary initiatives have the capacity to change the day-to-day behaviour of TNCs? Second, at this stage of its development, and in the context of crisis, is CSR relevant to Indonesia?

The paper is divided into four sections. The first refers to historic and cultural factors, which inhibit significant changes in corporate social and environmental performance. The second section examines codes of conduct and how they are viewed in Indonesia. The third refers to the environmental impact of large business, especially the mining and palm oil industries. The relevance of corporate social and environmental responsibility for Indonesia is discussed in the conclusion.

The discussion on codes of conduct presents both civil society and TNC perspectives. The paper explains that such codes are fundamentally flawed because: they may place corporations outside of the national regulatory system and bypass the established tripartite negotiation system won through labour reforms; the process and outcomes of monitoring are usually confidential; monitors usually only see plants chosen by the client; monitoring is often done by accounting firms that have insufficient technical knowledge to understand complex health and safety problems in production plants; sanctions for non-compliance are at best weak; codes only apply to a small proportion of workers; and TNCs often insist that affiliates and sub-contractors improve conditions but provide limited resources to support such change.

The paper notes that some tentative steps have been taken by government and some TNCs to improve their environmental performance, but few companies are involved. Some government-led voluntary initiatives related to pollution control have attempted to motivate change by naming, praising and shaming corporations. Some successes have been achieved, but consumer activism remains relatively weak, government and company resources for environmental initiatives have been stretched by economic crisis, and few participating firms have taken significant measures to improve their environmental management systems. And corporations that appear to have adopted the language of responsibility are often those that have been put in the spotlight by international civil society activism.

When viewed in the context of culture, economic and political development, and turmoil in Indonesia, the author concludes that CSR remains an ideal. In a context of instability, fear and violence, it is hard to consider something as abstract as CSR. But while it is fair to say that CSR makes a positive contribution to the human rights of workers in TNCs, it is also fair to say that it only makes a difference to those few corporations targeted by consumers or who are already thinking ethically and responsibly.

While some would argue that CSR paves the way for political development, the author contends that any effective implementation of CSR requires the machinery of an effective democratic government and civil society. The reverse would have corporations leading the process rather than the other way around.

Melody Kemp specializes in occupational health and safety and has worked as an independent labour monitor. She lived in Indonesia for 10 years and is now a freelance consultant based in Australia.

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