111124 nk nacd business ethics and csr


Published on

Published in: Business, Economy & Finance
  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

111124 nk nacd business ethics and csr

  1. 1. PREVIOUS ASSIGNMENTS NOKE KIROYAN – President Director & Chief Consultant, Kiroyan Partners o President Director, PT Newmont Commissioner, PT Agincourt Resources Pacific Nusantara (10/05 – 12/ 06) President Commissioner, PT Amstelco Indonesia Tbk. o Chairman, PT Rio Tinto Indonesia Independent Commissioner, PT Asuransi CIGNA (10/03 – 09/05) Commissioner, PT Wana Hijau Nusantara (Macquarie - REDD) o President Director, PT KaltimCURRENT PUBLIC SERVICE AND PROFESSIONAL MEMBERSHIPS Prima Coal – assigned by Rio Chairman, International Chamber of Commerce – Indonesia (ICC) Tinto (12/01 – 10/03) Co-Founder and Chairman, Board of Patrons, Indonesia Business Links (IBL) o President Director, PT Rio Tinto Business Advisory Council Member, United Nations Economic and Social Indonesia and Chairman, Rio Committee for Asia & the Pacific (UNESCAP) Partner, Partnership for Governance Reform in Indonesia Tinto Foundation (09/97 – 11/01) Member, National Committee on Governance (KNKG) o CEO, Salim Oleochemicals Inc., Founding Member and Advisor, UI Center for Governance Studies (UI – CGS) USA (04/96 – 08/97) Charter Member, Institute for Commissioners and Directors of Indonesia (LKDI) Member, Australian Institute of Company Directors (AICD) o Country Rep. Salim Group cum Trustee, Padjadjaran University (UNPAD) Director and Treasurer Albright & Trustee, The United States – Indonesia Society (USINDO) Wilson Ltd., Australia (12/94 – Trustee, Fulbright Indonesia Program (AMINEF) 03/96) Advisory Board Member, The Nature Conservancy (TNC) o Managing Director, Salim TERTIARY EDUCATION Deutschland GmbH, Germany, (10/91 – 11/94)  Postgraduate Diploma in Business Administration, Heriot-Watt University, Edinburgh, UK o Siemens Indonesia, starting as  Bachelor of Arts in Liberal Studies, Syracuse University, New York, USA Management Trainee, ending as  Bachelor in Communication Science, Padjadjaran University, Bandung, Indonesia  Industriekaufmann (Diploma in Commerce & Accounting for Industrial Companies), President Director, PT Siemens Nürnberg, Germany Indonesia (02/74 – 09/91) 2
  2. 2. Conceptualization of CSR and Ethics Regulating CSR: Law No. 40/2007 CSR and Sustainable Development Reporting on CSR Convergence of Concepts Standardizing CSR: ISO 26000CSR and Good Corporate Governance At the heart of CSR: Stakeholder Theory 3
  3. 3. Pre – 1950 • Personal philanthropy of business people1950s • Frank Abrams (Standard Oil of New Jersey): “Management’s Responsibility in a Complex World” (HBR 1951) • Howard R. Bowen:” Social Responsibilities of the Businessman” (1953)1970s • Morrell Heald: “The Social Responsibility of Business: Company and Community, 1900 – 1960” (1970) • Archie B. Carroll:”The Four-Part Model of Corporate Social Responsibility” (1979)1984 • R. Edward Freeman: “Strategic Management: A Stakeholder Approach “1987 • Brundtland Commission: Sustainable Development1992 • Earth Summit in Rio de Janeiro1997 • John Elkington: Triple Bottom Line1999/2000 • The Global Compact and Millennium Development Goals2000s • Ethical conduct of business (post Enron, Tyco, WorldCom, Parmalat and others)Mid-2000s • Mainstreaming of CSR and convergence of concepts2010 • ISO 26000 international standard 4
  4. 4. STRATEGY AND COMPETITION Community Environmental Human rights Employment compliance Voluntary policies and actions beyond legal Anti-corruption TransparencyDevelopment Policies Initiatives Policies initiatives Policies ANTI-COMPAN ENVIRON HUMAN STOCK- LABOR CORRUPT Y -MENTAL RIGHTS MARKET LAWS -ION LAWS LAWS LAWS RULES LAWS 5
  5. 5. Area 1 – Area 3 –Profitable, legal, ethical : Legal and ethical but notGo for it! profitable. Find ways to seek Ethical profitability ResponsibilityArea 2b – 3Profitable and legal. LegalProbably ethical too. 1 ResponsibilityProceed cautiously. 2b 2a Economic Area 2a – Responsibility Profitable and legal. Proceed cautiously(“Business & Society: Ethics and Stakeholder Management,” Archie B. Carroll & Ann K. Buchholtz, 2009) 6
  6. 6. The commitment of businesses to behave ethically and to contribute to sustainable economic development by working with all relevant stakeholders to improve their lives in ways that are good for business, the sustainable development agenda, and society at large.(The World Bank Group, 2008) 7
  7. 7. Responsibility of an organization for the impacts of its decisions and activities on society and the environment, through transparent and ethical behavior that  Contributes to sustainable development, health and the welfare of society;  Takes into account the expectations of stakeholders;  Is in compliance with applicable law and consistent with international norms of behavior; and  Is integrated throughout the organization and practiced in its relationships. 8(Adapted from “ISO 26000: Guidance on social responsibility ,” 2010 )
  8. 8. Innovation CSR Fundamental Sustainable as strategic and business models value creation operational impact Medium to high CSR strategic and Compliance as risk management operational impactProvide Littlefunding CSR strategic orand skills as corporate philanthropy operational impact(UN Global Compact as cited in “Corporate Social Responsibility in a Global Economy,” 2009) 9
  9. 9. Transform- Elementary Engaged Innovative Integrated ing • Focus on jobs, • Companies begin • Companies begin • Companies begin • Full disclosure of profits, and to introduce to pay real to integrate their what is happen- paying taxes with philanthropy and attention to business models ing within the a legal some degree of stakeholders more holistically company compliance environmental • Adopt a more with corporate including orientation management responsive citizenship negative • Since there is no • Leadership stance to activities information via corporate becomes aware stakeholders with • Responsibility social reports citizenship of the need for a programs based management • “Changing the strategy, “social license to on their interests • Leadership game” by leadership tend operate” and needs begins to creating new to be out of touch • Still reactive • Willingness to understand that ventures or with issues and rather than engage with reputation crucial markets that have relationships proactive CSOs and NGOs to success and pro-social tend to be • Begin that have that corporate benefits unilateral communicating concerns about citizenship is • Engage with wide • When issues with CSOs and the business’ integral part in range of civil arise from the NGOs on a practices developing society. societal domain project basis • Willingness to reputation Governmental they tend to react rather than begin being more • Incorporate and non- defensively and systematically transparent external governmental communicate and strategically through public assurance such enterprises unilaterally multiple bottom- as responsibility • Leading on line reporting auditing by sustainability and outside agencies business-society relationships(“The Paradoxes in Communicating Corporate Social Responsibility,” Sandra Waddock and Bradley K. Googins in “The Handbook of 10Communication and Corporate Social Responsibiliy” – Øivind Ihnen, Jennifer L. Bartlett and Steve May [eds.], 2011)
  10. 10. Chapter I Article 1 Paragraph 3Social and environmental responsibility is thecommitment of corporations to participate insustainable economic development toimprove the quality of life and theenvironment in ways that are beneficial to thecorporation itself, the local communities aswell as society at large. 11
  11. 11. Chapter V Article 74 2) Social and environmental1) Corporations in the business responsibility as stipulated under of and/or whose business paragraph 1) is a corporation’s obligation that is budgeted and relate to natural resources treated as costs of the corporation must conduct social and and implemented with due environmental responsibility consideration of propriety and reasonableness3) Corporations that neglect 4) Further legislation on social their obligation as stipulated and environmental under paragraph 1) will be responsibility will be sanctioned under the established in a Government prevailing laws Regulation 12
  12. 12. After more than 3 years, the implementing regulations asstipulated under Article 74 paragraph 4) are yet to be issued, in themeantime various government bodies at central and regionallevels are taking matters into their own hands, e.g.: East Java government preparing Regional Regulation (PERDA) to levy 2.5% of company profits for welfare in the name of CSR Minister for Improvement of Underdeveloped Regions targets 65% from “CSR funds” Minister for State-owned Enterprises to draft regulations for “CSR funds” to promote sports and arts Minister for Home Affairs to draft laws on a forum for management of CSR in the regions under his auspices 13 13
  13. 13.  Human Rights  Labor  Environment  Anti Standards Corruption1. Support and 3. Freedom of 7. Support a pre- 10. Work against respect association and cautionary all forms of protection of recognition of approach to collective corruption, human rights environment2. Avoid being bargaining 8. Promote greater including complicit in 4. Elimination of environmental extortion and human rights forced and responsibility bribery abuses compulsory labor 9. Encourage 5. Abolition of child environmentally labor friendly 6. Elimination of technologies discrimination in employment and occupation(United Nations, 1999/2000) 14
  14. 14. Global Reporting Initiative (GRI) • currently the most comprehensive and influential • de facto standard for Sustainability Reporting • its principles displays profound stakeholder orientation: INCLUSIVITY - calls for the organization to identify its stakeholders and explain how it has responded to their needs RELEVANCE AND MATERIALITY - requires coverage in the report of issues and indicators that would substantively influence the decisions of stakeholders COMPLETENESS - entails providing information sufficient to enable stakeholders to assess economic, environmental and social performance in the reported period(“The Oxford Handbook of Corporate Social Responsibility” – Andrew Crane et al, 2008) 15
  15. 15. UNGC Communication on Global Reporting Initiative G3 Guidelines Progress (COP) Element Disclosures A statement of continued Strategy and Analysis: support for the Global Compact in a Support for the Global Compact and how the ten principles influences the message from the CEO. company’s strategy can be presented in a CEO letter. A description of practical Governance, Commitments, Engagement: actions (commitments, policies, Descriptions of statements of mission or values, codes of conduct, principles, systems and activities), including, if charters, or other initiatives the company endorses that assist the company in appropriate, partnerships created, that addressing sustainability issues, along with high level processes for setting participants have taken to implement the strategies, defining risk and opportunities, can be used to demonstrate Global Compact principles during the commitments to implementation of GC principles. previous year. Disclosure on Management Approach (DMA): Overview of the company’s management approach in each category (e.g. human rights) can be used to describe how the GC principles are put into practice. Select Performance Indicators: Select performance indicators ask for description of actions in addition to quantitative data. Measurements of outcomes Performance Indicators using, as much as possible, standard Stating performance shows outcomes and results for economic, environmental indicators or metrics. and social categories. Performance on each of the GC principles is covered with one or more indicators.(“Making the Connection: The GRI Guidelines and the UNGC Communication on Progress,” UNGC Office, 2007) 16
  16. 16. Scope Clause 1Guidance to all types Two fundamental practices of social responsibility Clause 5of organization Recognizing social Stakeholder identificationregardless of their sizeor location responsibility and engagementDefinition Clause 2 Social resp. Sustainable developmentTerms, abbreviations Organizational governance Clause 6and abbrev. Terms core subjectsUnderstanding The Fair Community Human Labor Consumer Environ- operating involvement/Social Clause 3 rights practices ment practices issues developmentResponsibilityHistory, Characterist-ics, Relationship Related actions and expectationsbetween SR andSustnble. Developmnt.. Integrating The relationship of Understanding the Clause 7 social an organization’s social responsibilityPrinciples of responsibility characteristics to SR of the organizationSocial Clause 4 throughout anResponsibility organization Practices for• Accountability Communication integrating social Voluntary initiatives• Transparency on social responsibility for social• Ethical Behavior responsibility throughout an responsibility• Respect for organization stakeholder interests Reviewing and improving an Enhancing• Respect for rule of organization’s actions and credibility law practices related to SR regarding SR• Respect for internatnl norms of behavior Bibliography: Authoritative sources and Annex: Examples of voluntary initiatives• Respect for human additional guidance and tools for social responsibility rights(Adapted from “ISO 26000: Guidance on social responsibility,” International Organization for Standardization, 2010 ) 17
  17. 17. Government Creditors (Regulator) CG in broad Board of sense AGM Commissioners CG in Suppliers Customers narrow Board of sense Directors Corporate Manager Manager Manager Manager Manage- ment Employees Other groups Community(Adapted from Forum for Corporate Governance in Indonesia, 2005) 18
  18. 18. Narrow Sense Broad Sense • Structure and • The whole set of legal, cultural, and institutional functioning of arrangements that boards of directors determine: and rights and • what publicly traded corporations can do, prerogatives of • who controls them, shareholders in • how control is exercised boardroom and decision-making. • how the risks and returns from the activities they undertake are allocated. 19(“Ownership and Control: Rethinking Corporate Governance for the 21st Century” – Margareth M. Blair, 1995)
  19. 19. A company must provide material and relevant information that is Transparency easily accessible and understandable by stakeholders and include issues not mandated by laws but also other information deemed necessary by stakeholders. A company must be accountable for its performance Accountability transparently and fairly. Thus the company must be managed in a proper and measurable manner considering the interests of shareholders and other stakeholders. A company shall abide by laws and regulations and fulfill its Responsibility responsibility to the communities and environment for the purpose of maintaining long term sustainability of the business and be recognized as a good corporate citizen. To accelerate the implementation of GCG principles, a company Independence must be managed independently with an appropriate balance of power, in such a manner that no single company’s organ shall dominate the other. In conducting its activities, a company must always consider the Fairness interests of shareholders and other stakeholders on a fairness principle.(“Indonesia’s Code of Good Corporate Governance” – National Committee on Governance, 2006) 20
  20. 20. Any group or individual who can affect or is affected by the achievement of the organization objectives(“Strategic Management: A Stakeholder Approach,” R. Edward Freeman, 2011) 21
  21. 21. International media INTERNATIONAL National National NATIONAL media government Customers International NGOs Local Local LOCAL media government Academic Customers institutes Contractors Employees INTERNAL Local Customers NGOs Trade Unions Think Suppliers Local Industrial tanks interest customers Local groups community Investors Industry & National business NGOs assoc. Multilateral investors(“Unfolding Stakeholder Thinking: Theory, Responsibility and Engagement” – Jörg Andriof, Sandra Waddock, Bryan Husted, SandraSutherland Rahman, 2002) 22
  22. 22. Stakeholder Stakeholder Stakeholder Identification Analysis Engagement What corporate Who are our What are their social responsibilities do stakeholders? stakes? we have to our stakeholders? What What strategies, opportunities and actions, or challenges are decisions should presented by our we take to best deal with these stakeholders? responsibilities?(“The Pyramid of Corporate Social Responsibility – Toward the Moral Management of Organizational Stakeholders,” - Carroll, A. B., BusinessHorizons No. 34, 1991) 23
  23. 23. To whom does the organization have legal obligations? Who might be positively or negatively be affected by the organizations activities or decisions? Who manifested concern about the issues or impacts? Who has been involved in the past when similar concerns need to be addressed? Who can help the organization address specific impacts? Who can adversely affect the organization’s ability to meet its important objectives? Who would be disadvantaged if they were excluded from the engagement? Who in the value chain is affected? Who may have an impact on the reputation of an organization? Who may influence the policy and regulatory environment in which the organization operates? Who may impact on the value of the organization?(Adapted from “ISO 26000: Guidance on social responsibility,” International Organization for Standardization, 2010 ) 24
  24. 24. 1 2 1 3 3 0 = Non-Stakeholder 1 = Latent Stakeholder 2 4 2 2 = Expectant Stakeholder 3 3 3 = Definitive Stakeholder 4 = Primary Stakeholder 1 2 1(“The Primordial Stakeholder: Advancing the Conceptual Consideration of Stakeholder Status for Natural Environment,” - Driscoll, C. andStarik, M. Journal of Business Ethics, Vol. 49, 2004)(“The Natural Environment as a Primary Stakeholder: the Case of Climate Change,” - Haigh, N. and Griffiths, A. Business Strategy and the 25Environment, Aug 2007)
  25. 25. Legiti- Score Stakeholder Category Power macy Urgency Proxi-mity (/20) Bupati pr 5 5 5 5 20 BAPPEDA pr 4 5 5 5 19 BPN pr 4 5 5 5 19 BAPEDALDA pr 3 5 5 5 18 Gunung Village de 2 4 5 3 14 Wira (informal leader) de 5 5 2 3 15 Ethnic Community (Jakarta) la 1 1 1 2 5 Village Youth Org. de 4 5 1 5 15(Adapted from Stakeholder Analysis and Perception Study conducted by Kiroyan Partners around a mining operation inIndonesia as basis for Stakeholder Engagement and Community Development programs) 26
  26. 26. Stakeholder engagement involves dialogue between the organization and one or more of its stakeholders Stakeholder engagement can take many forms – it can begin as a response by an organization to one or more stakeholders and can take place in informal or formal settings Stakeholder engagement should be interactive and is intended to provide opportunities for stakeholders’ views to be heard – its essential feature is that it involves two-way communication(Adapted from “ISO 26000: Guidance on social responsibility,” International Organization for Standardization, 2010 ) 27
  27. 27. Level of Engagement Methods of Engagement Consult  Surveys  Focus groups Limited two-way engagement: organization  Meetings with selected stakeholder/s ask questions, stakeholders answer  Public meetings  Workshops  Online feedback mechanisms  Advisory committees Negotiate  Collective bargaining with workers through their unions Involve  Multi-stakeholder forums Two-way or multi-way engagement:  Advisory panels learning on all sides but stakeholders and  Consensus building process  Participatory decision making process organization act independently  Focus groups  Online feedback schemes Collaborate  Joint projects  Joint ventures Two-way or multi-way engagement : joint-  Partnerships learning, decision making and actions  Multi-stakeholder initiatives Empower  Integration of stakeholders into governance, strategy and operations management New forms of accountability; decisions delegated to stakeholders; stakeholders play a role in governance(“AA1000 Stakeholder Engagement Standard 2011 – Final Exposure Draft,” – AccountAbility, 2011) 28
  28. 28. Market Environment Business COMPETITIVE Financial Resources Strategy ADAVANTAGE Performance Corporate Values and Ideology Social Social Responsibility Performance Nonmarket Environment(“Corporate Social Strategy: Stakeholder Engagement and Competitive Strategy,” - Bryan W. Husted & David Bruce Allen, 2011) 29
  29. 29. Menara Karya, 10th Floor Suite HJl. HR Rasuna Said Blok X-5 Kav. 1-2 Jakarta 12950 – INDONESIA T: +6221 5794 4694 F: +6221 5794 4696 info@kiroyan-partners.com www.kiroyan-partners.com