The relationship between CSR and competitiveness: the Indonesian case
The growing worldwide recognition of the need for companies to become sustainable and to optimize economic contribution, environmental performance and social responsibility, has become more important in Indonesia. Indonesia is the first country in the world to make Corporate Social Responsibility mandatory by Law instead of voluntarily. Indonesia has a fast growing economy, but there are still 32 million people living below the poverty line and Indonesia is one of the most polluted countries in the world. Most pressing environmental issues for Indonesia are the depletion of raw materials, energy and water, the loss of biodiversity, and the pollution of air, water and soil. Most pressing social issues for Indonesia are the underdeveloped communities, incidences of corruption, and inequality between men and women. Indonesian culture doesn’t support sustainable behaviour, therefore, in the growth path towards becoming a developed country, the government obliged Indonesian companies to limit their environmental and social impacts by implementing sustainable practices. This must not affect the competitiveness of these companies in a negative way, which leads to the purpose of this study: to find out if CSR has a positive effect on competitive advantage for Indonesian companies. When there is a positive relationship between these two concepts, investment in CSR practice could become more interesting for Indonesian companies.
By making use of primary data sources (interviews and surveys) the understanding of CSR in Indonesia and the relation between competitive advantage and CSR was analysed. First the concepts of CSR and competitive advantage had to be analysed by doing a literature study. Then experts on the field of CSR were interviewed to obtain more information on CSR in Indonesia. And last, CSR managers of Indonesian companies were interviewed by using a survey to find out their perception on the effect of CSR on competitive advantage. In one company also other employees were asked about their perception of CSR and the effect it had on their motivation and commitment.
By analysing the information it became clear that CSR is perceived to have a positive influence on the indicators of competitive advantage and this effect also trickles down to the employees in the company by improving their employee commitment. The most important driver for companies to implement CSR is ‘strategic reasons’, and then the ‘demand from stakeholders’. Although Indonesia is the first country with a law about CSR, the understanding and implementation of CSR is still weak and the focus is on social issues rather then on environmental issues.
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