Corporate Sustainability and Reporting in Indonesia: Building Capacity
In today’s corporate world, disregarding one’s corporate social responsibilities or sustainability requirements is a guaranteed way of alienating the market. For a corporation to be recognized as a sustainable business, therefore, it needs both to conduct Corporate Social Responsibility (CSR) as part of Corporate Sustainability Management (CSM), as well as take the initiative in reporting it to the stakeholders.
Corporate Sustainability is becoming a key driver in making business and economic decisions; decisions both on the part of the corporations themselves and on the part of the public, the market, and on investors and shareholders. All these stakeholders expect, or soon will expect, to see CSR and CSM embedded in the fabric of all aspects of a corporation’s business operations.
A consistent, reliable, credible, and transparent reporting mechanism is a critical element in the process of communicating a corporation’s efforts to be more sustainable. To provide that mechanism for corporations in Indonesia, an NGO called the National Center for Sustainability Reporting (NCSR) was established in 2005. Five prominent organizations, the Indonesian Institute of Management Accountants (IAMI), Indonesia-Netherlands Association (INA), National Committee on Governance (NCG), Forum for Corporate Governance in Indonesia (FCGI), and   The Association of Indonesian Publicly Listed Companies (AEI), pooled their talents and resources to create the NCSR.
They saw the Center’s mandate as providing five main programs intended to:
- Elevate CSR reporting consciousness.
- Promote and disseminate sustainability or CSR reporting guideline
- Conduct CSR education and certification training
- Organize the Indonesia Sustainability Reporting Awards (ISRA).
- Maintain mutually beneficial relationships with stakeholders
The purpose of those programs is to strive to achieve the overall targets of the NCSR, specifically that:
- All Indonesian publicly-listed companies will report their CSR activities in their annual reports by 2010, and 20% of them will produce stand-alone Sustainability or CSR Reports, separate from the annual reports.
- Stand-alone Sustainability or CSR reports for organizations with high social or environmental impact become compulsory in Indonesia by 2013.
Despite the fact that the NCSR has neither sought nor received any governmental funding, all five of the programs envisioned are currently underway and showing remarkable success in moving toward the center’s goals.
The NCSR is a lean and efficient organization, using premises and volunteer staff provided by the INA, an interest-free loan for operating capital from the IAMI, and even personal donations of cash for salaries from the executive director, who is not compensated.
Other funding is raised by the center through sponsorship and fees for its events and its training and educational programs. In 2009 the NCSR expects that its track record and therefore, its credibility will allow for accessing external funding sources.
The NCSR, moreover, has an enviable track record for such a recently established organization. In 2005, the year the NCSR was established, there was only one Sustainability Report published. In 2006, that number had increased to four reports, then in 2007 it jumped to 12 reports, and in 2008 16 stand-alone Sustainability or CSR Reports were published. Each year, the center hosts an awards ceremony where corporations are recognized for the quality of their reports.
Since the establishment of the NCSR, the Indonesian government has passed Article 66 of the Limited Liability Company Law (No. 40, 2007) making CSR reporting mandatory. Not only did the center endorse the law, but it has been appointed to the Special Task Force established to create the ancillary regulations which will be the meat in the legal sandwich.