My view of state of the arts of CSR toward end 2011.

2. NOKE KIROYAN – President Director & Chief Consultant,
PREVIOUS ASSIGNMENTS
Kiroyan Partners
 Commissioner, PT Agincourt Resources o President Director, PT Newmont
 President Commissioner, PT Amstelco Indonesia Tbk. Pacific Nusantara (10/05 – 12/ 06)
 Independent Commissioner, PT Asuransi CIGNA o Chairman, PT Rio Tinto Indonesia
 Independent Commissioner, PT SMR Utama Tbk. (10/03 – 09/05)
 Commissioner, PT Wana Hijau Nusantara (Macquarie - REDD)
o President Director, PT Kaltim
CURRENT PUBLIC SERVICE AND PROFESSIONAL MEMBERSHIPS Prima Coal – assigned by Rio
Tinto (12/01 – 10/03)
 Chairman, International Chamber of Commerce – Indonesia (ICC)
 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 Committee Indonesia and Chairman, Rio
for Asia & the Pacific (UNESCAP) Tinto Foundation (09/97 – 11/01)
 Partner, Partnership for Governance Reform in Indonesia
 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)
Country Rep. Salim Group cum
 Member, Australian Institute of Company Directors (AICD) o
 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
Deutschland GmbH, Germany,
TERTIARY EDUCATION (10/91 – 11/94)
 Postgraduate Diploma in Business Administration, Heriot-Watt University,
o Siemens Indonesia, starting as
Edinburgh, UK
Management Trainee, ending as
 Bachelor of Arts in Liberal Studies, Syracuse University, New York, USA
President Director, PT Siemens
 Bachelor in Communication Science, Padjadjaran University, Bandung, Indonesia
 Industriekaufmann (Diploma in Commerce & Accounting), Nürnberg, Germany Indonesia (02/74 – 09/91)
2

3. Conceptualization of CSR
Regulating CSR: Law No. 40/2007
Reporting on CSR
Convergence of Concepts
Standardizing CSR: ISO 26000
At the heart of CSR: Stakeholders
3

4. Pre – 1950 • Personal philanthropy of business people
1950s • 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 Development
1992 • Earth Summit in Rio de Janeiro
1997 • John Elkington: Triple Bottom Line
1999/2000 • The Global Compact and Millennium Development Goals
2000s • Ethical conduct of business (post Enron, Tyco, WorldCom, Parmalat and others)
Mid-2000s • Mainstreaming of CSR and convergence of concepts
2010 • ISO 26000 international standard
4

5. STRATEGY AND COMPETITION
Community Environmental Human rights Employment compliance
Voluntary policies and actions beyond legal Anti-corruption Transparency
Development Policies Initiatives Policies initiatives Policies
ANTI-
COMPAN ENVIRON HUMAN STOCK-
LABOR CORRUPT
Y -MENTAL RIGHTS MARKET
LAWS -ION
LAWS LAWS LAWS RULES
LAWS
5

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) 6

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.
7
(Adapted from “ISO 26000: Guidance on social responsibility ,” 2010 )

8. OBLIGATION
CHARITY OF
COMPANIES
PAID FOR
SEPARATE
FROM
FROM
PROFIT, NOT
BUSINESS
COSTS
8

9. Innovation CSR Fundamental
Sustainable
as strategic and
business models
value creation operational impact
Medium to high
CSR strategic and
Compliance as risk management operational impact
Provide Little
funding CSR strategic or
and skills as corporate philanthropy operational
impact
(UN Global Compact as cited in “Corporate Social Responsibility in a Global Economy,” 2009) 9

10. 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 10
Communication and Corporate Social Responsibility” – Øivind Ihnen, Jennifer L. Bartlett and Steve May [eds.], 2011)

11. Tanggung Jawab Sosial dan Lingkungan adalah
komitmen Perseroan
untuk berperan serta dalam
pembangunan ekonomi berkelanjutan
guna meningkatkan kualitas kehidupan dan
lingkungan yang bermanfaat, baik bagi
Perseroan sendiri, komunitas setempat,
maupun masyarakat pada umumnya.
11

12. Laporan tahunan sebagaimana dimaksud
pada ayat (1) harus memuat sekurang-
kurangnya:
a. Laporan keuangan yang terdiri atas sekurang-
kurangnya neraca akhir tahun yang baru lampau
dst….
b. Laporan mengenai kegiatan Perseroan;
c. Laporan pelaksanaan Tanggung Jawab Sosial dan
Lingkungan;
12

13. Bab V Pasal 74
1) Perseroan yang menjalankan kegiatan usahanya di
bidang dan/atau berkaitan dengan sumber daya alam
wajib melaksanakan TJSL
2) TJSL sebagaimana dimaksud dalam ayat 1)
merupakan kewajiban Perseroan yang dianggarkan
dan diperhitungkan sebagai biaya Perseroan yg
pelaksanaannya dilakukan dg memperhatikan
kepatutan dan kewajaran
3) Perseroan yg tidak melaksanakan kewajiban
sebagaimana dimaksud pada ayat 1) dikenai sanksi
sesuai dengan ketentuan perundang-undangan
4) Ketentuan lebih lanjut mengenai TJSL diatur
dengan Peraturan Pemerintah
13

14.  Human Rights  Labor  Environment  Anti
Standards Corruption
1. 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 environment
2. 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

15. 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

16. 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

17. Scope Clause 1
Guidance to all types Two fundamental practices of social responsibility Clause 5
of organization Recognizing social Stakeholder identification
regardless of their size
or location responsibility and engagement
Definition Clause 2 Social resp.
Sustainable development
Terms, abbreviations Organizational governance Clause 6
and abbrev. Terms core subjects
Understanding The Fair Community
Human Labor Consumer
Environ- operating involvement/
Social Clause 3 rights practices ment practices issues development
Responsibility
History, Characterist-
ics, Relationship Related actions and expectations
between SR and
Sustnble. Developmnt.. Integrating The relationship of Understanding the Clause 7
social an organization’s social responsibility
Principles of responsibility characteristics to SR of the organization
Social Clause 4 throughout an
Responsibility 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

18. Sustainable Development
Economic growth
Social progress
Environmental
protection
(“The Future of Sustainability: Re-thinking Environment and Development in the Twenty-first Century,” IUCN, 2006) 18

19. Economy
Society
Environment
(“The Future of Sustainability: Re-thinking Environment and Development in the Twenty-first Century,” IUCN, 2006) 19

20. 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) 20

21. 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) 21

22. 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) 22

23. 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, Sandra
Sutherland Rahman, 2002) 23

24. Identification of and engagement
with stakeholders are fundamental
to social responsibility
An organizations should determine who has an
interest in its decisions and activities,
so that it can understand its impacts and
identify how to address them
(Adapted from “ISO 26000: Guidance on social responsibility,” International Organization for Standardization, 2010 ) 24

25. 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., Business
Horizons No. 34, 1991) 25

26. 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 ) 26

27. 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. and
Starik, 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
27
Environment, Aug 2007)

28. 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 in
Indonesia as basis for Stakeholder Engagement and Community Development programs) 28

29. 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 ) 29

30. 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) 30

31. Social research-based approach to CSR and Stakeholder
Relations Management (“Sniper Approach”) allows more
effective and efficient use of resources and therefore
contributes to economic sustainability as well.
31

32. Market
Environment
Business COMPETITIVE Financial
Resources ADAVANTAGE
Strategy 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) 32

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