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Why CSR? Please input comment & critique

A company need to have good and harmonious relationship with its surrounding communities and the stakeholders to get support, to get social license to operate so it can have smooth operations. Good practice of CSR will secure company business. It will also determine the sustainability and future of business.

The value of community and stakeholders acceptance as a whole might be similar with the value of the project itself. If a community and other stakeholders refuse a company to operate in their area, it means, the company can not do business there. It may loss the project with value of million dollars. There has been lots of news currently in Indonesia that community protested which want a company to close down and to go away as its presence did not give benefits to the surrounding community.


Pembahasan - Budhi S. (Administrator)

Tulisan ini dikirimkan dari salah seorang Moderator KBK Community Development Milis Migas Indonesia Bapak Apriadi Djamhurie Gani - Thiess.
Silahkan bagi anggota milis untuk memberikan masukan sekaligus didiskusikan di Milis Migas Indonesia.


"Why Corporate Social Responsibility (CSR)"

Oleh : Apriadi Djamhurie Gani*
Source : www.fotografer.net

Do we care for them in our surrounding areas ?

A company need to have good and harmonious relationship with its surrounding communities and the stakeholders to get support, to get social license to operate so it can have smooth operations. Good practice of CSR will secure company business. It will also determine the sustainability and future of business.

The value of community and stakeholders acceptance as a whole might be similar with the value of the project itself. If a community and other stakeholders refuse a company to operate in their area, it means, the company can not do business there. It may loss the project with value of million dollars. There has been lots of news currently in Indonesia that community protested which want a company to close down and to go away as its presence did not give benefits to the surrounding community.

In a project site of a company, there were 6 demonstrations within the last 2 months in 2006, and in some cases, it stopped a project operation for a few days. How much it cost to a company? No exact value estimated, but it would be million dollars and it can be calculated. For example, for 1 day off operation due to community blockade, it would be a certain million dollars loss. "On the last 4 months, one of our mining pit had 4 demonstrations, 2 of them stopped pit operation, and once that the community blockaded the gate for 2.5 days. We have lost opportunity with the value of USD $ 2.5 Million dollars" said a site project manager.

The negative impacts do not stop on financial loss only. There are other "multiplier negative effects". Bad company reputation and image is the worst case. A conflict with the surrounding community, which end up with blockade and operation shut down, will impact on company performance, production target, waste of staff precious time and resources to settle down the case and more expensive costs to company image and reputation. It is not only at local and national but also at international level. International finance agencies will not finance the company which is irresponsible as they are now applying strict social and environment requirement. Shareholders will not invest with company which has bad track record on social & environment as it will risk their investment. Buyers and public in general will not buy products from a company which practice bad corporate citizenship. The client will not award the project to a contractor which has bad reputation and image on social aspects as it will risk their massive capital.

Good practice of CSR is a social investment. Why? It secures company business, sustainability and business future. It will reduce social conflict, mitigate social risk and hence reduce obstruction on company operations. It will enhance company image and reputation, consequently attract funding, investment, buyer, and job contracts.

Although it is not company fault, there are some instances that a company operating for several decades in an area, where its presence did not create significant improvement of lives of people in the
surrounding. People are still poor, with limited basic facilities, none of them became an engineer who work in that company. This situation creates social gap and social jealously and at the end generates a social conflict. It is an excellent strategy to engage and to manage social and environmental issues at very early stages, as it is cheaper, strategic, and manageable before they become risks, unmanageable and high cost

As good neighbour, good corporate citizenship, we do not want to see our neighbour, the surrounding community, live with the very poor condition while we have been working in their land for decades, extracting their natural resources, getting high profit, and then leave them without any significant improvement of their lives. We also want to see that our presence in their area have significant positive impact creating "sense of belonging" to the company. We want to leave a positive legacy. It is our social responsibility now to create mutual benefits and to live in harmony.


Tanggapan - Steven.Brown@erm

Berikut adalah komentar saya terhadap isu CSR di dunia migas Indonesia.


The case for CSR has been eloquently stated by our friend Bp Apriadi Djamhurie Gani. There is no denying the overwhelming need for CSR. More and more, it is considered necessary that the private sector plays a major role in what was previously seen as the government's responsibility. This is rapidly being acknowledged by major oil and gas companies around the world.

Looking forward, the key challenge in Indonesia is to develop a common understanding and good working relationship between PSCs, BPMigas and local governments.

One of the problems is that CSR is not well defined, leading to confusion when dealing with the regulators. One common misperseption is that CSR equates to community development and other charity programs. It's true that community development is one way that a company can contribute to
society and demonstrate it's responsibility, however this is actually a minor part of CSR.

While CSR is a relatively new phrase, the concept has been well established in the oil and gas industry for decades. The simplest (and perhaps most crucial) way of implementing CSR is in proper project planning and design that considers issues broader than just the economic feasibility of the project. A good company can demonstrate CSR by conducting proper scoping studies, early stakeholder mapping and engagement activities, thorough socialisation and comprehensive EIA studies. These are just a few things that have been around for a long time, and are essential for any company that is serious about CSR.

Unfortunately, while we all agree that CSR is important, we often overlook the core aspects of CSR and rather focus on the softer areas like community development. Regulators will tell PSCs that they must help local communities, and yet will also tell PSCs that the scoping studies and socialisation should just be done during the AMDAL study. This occurs because PSCs mis-use the word CSR. It gives regulators the impression that CSR is just about charity or comdev.

In conclusion I'd like to lend my support to Bp Apriadi Djamhurie Gani in raising the awareness of CSR. As this awareness grows, the key point will be to ensure we all have a common definition of this rather fuzzy or unclear topic. I believe there would be benefit from gathering together a small team of PSCs, experts and regulators (BPMigas) to define what CSR means to the oil and gas industry of Indonesia.


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