Integrating GCG and CSR: GCG as a Precondition for CSR Success

The title of this writing was actually adopted from a radio talk-show series namely CSR Wisdom on SmartFM – 95.9 FM broadcasted in Jakarta on 11 March 2014. At that moment, PT Modernland Realty Tbk or usually called Modernland, was invited to share its corporate social responsibility (CSR) best practices to the audience. The talk-show was perceived inspiring, resulted in enthusiastic responses from the audience, thus considered worthwhile to be appointed for this writing.

Before stepping into the main discussion, the following is a brief profile of the Company. Modernland was established in 1983 as one of the pioneers of property business in Indonesia. Over the decades, the Company has proven its dedication and participation in developing the best properties in the country, particularly in Greater Jakarta, in accordance with the increasing green awareness and quality standards. Today, Modernland has 6 pillars of businesses consist of urban development, low-cost housing, industrial estate, infrastructure, commercial and apartment, and hospitality. Its vigorous endeavors have recently yielded an outstanding achievement i.e. became the 2013 fifth fastest growing companies in Indonesia (Fortune Indonesia, 8 December 2013 edition).

Concurrent with its forceful business expansion, Modernland has also been trying to bring about significant improvements on its CSR practices for the past few years. The rapid headway in practicing its CSR had brought global recognition by achieving an international CSR award namely Communitas Awards 2013 with the predicate Excellence in CSR organized by Association of Marketing and Communication Professionals (AMCP) from Texas, USA. The judges acknowledged the strong commitment and vigorous efforts of the Company in practicing CSR and the wide impact it brought to the internal and external stakeholders.

Doing CSR right from the start is Modernland’s commitment. Many companies in the country failed to practice CSR properly in terms of deviating from the true concept where CSR should be perceived as an activity beyond compliance. Practicing CSR without fulfilling in advance the compliance aspects would bring the practice of greenwashing or other forms of image deception by companies, whether they realized it or not. The race for achieving CSR awards that has been intense and popular for the past decade has blinded many companies where they neglected their operational responsibilities to solely fulfill their citizenship responsibilities.

These concerning facts have backgrounded Modernland to practice CSR in a proper manner. The notion is to ensure that the Company has complied with all relevant regulations before moving into any CSR initiatives. In order to do so, the Company has created a supportive system. The system contains compliance and beyond compliance aspects where the ultimate objective is to increase the Company’s value. This system refers to the GCG & CSR Department that was established last year (2013). The department’s main functions are to ensure that the Company is provided with updated good corporate governance (GCG) guidance; and implementing effective CSR programs. Thus, it plays two different yet interdependent roles namely GCG and CSR. The GCG role focuses on compliance and the internal environment whereas CSR focuses on beyond compliance (voluntary activities) and the external environment.

As we know that conceptually GCG is the system that properly directs and controls the company to achieve the company’s goals. Therefore the actors of GCG (in Indonesia) are the company’s leaders namely the board of directors (BOD) and the board of commissioners (BOC), supported by the Internal Audit and Corporate Secretary Division. Since Modernland went publicly-listed in 1993, the Company is mandatory to practice GCG. In addition, since the past few years the Company has been increasingly impassioned to practice CSR, especially after knowing that social and environmental issues had become more complex over time and more companies were engaged to overcome such matters. Thus, it was the time for the Company to become more serious in practicing CSR and needed a solid unit that holds such responsibility. The idea to establish a CSR department then came from the directors and was welcomed throughout the Company. This was because previous CSR activities were practiced separately by divisions in the Company without any strategic planning and standardization.

The idea did not stop here. The Company was aware about the dangerous trap that could lead towards image deception and thought a way to avoid such trap. The notion was how to obey all relevant regulations and then initiate social and environmental activities so that the beneficiaries of such activities could feel and perceive it as added values rather than solace or redemption. Many instances had occurred particularly in Indonesia where companies showcased their CSR activities on TV or papers (e.g. giving scholarships, help the poor) but then a couple of days later they were protested by NGOs for their lousy waste management or human rights harassment. In addition, many companies actually had great CSR designs and plans but unfortunately did not receive sufficient support from their top managers and ultimately the plans did not make it into action. These issues had pushed the Company to become more creative and brought about the integration of GCG and CSR affairs into one department.

The idea to integrate both fields into one department was novel and considered as a breakthrough, at least in Indonesia. Indeed, it brought many positive results, such as the easiness for the top managers to accept even the most innovative and unusual CSR ideas; the presence of a straightforward procedure in communicating CSR activities; and the most easily seen is the smooth disbursement of the CSR budget. For example, last February the Company has donated five units of ambulances and three sets of flood pumps with the total value of Rp1.5 billion (USD150,000) with the disbursement process in just less than a week.

Because of the GCG responsibilities carried by this department is providing updated GCG guidance (e.g. work guide, evaluation guide, code of conduct, etc.) and training to the BOD and BOC, thus give direct access for the department to these top managers (decision makers). This access of communication is very important and useful to plant CSR spirit and paradigm into the Company’s leaders where ultimately results in supportive policies on CSR. Moreover, with the support of the leaders, all of the managers in the Company were given Basic CSR Training last year which has given them awareness that every component in the Company is a CSR actor based on ISO 26000.

In 2013, the department also formulated a policy called the GCG & CSR Policy containing the GCG and CSR philosophy, vision, mission, and strategic planning for five years ahead. The policy also states the annual CSR budget in the amount of 0.5% from net profit and was signed by the directors including the President Director to show a sign of commitment. The GCG & CSR Charter that contains the essence of this policy can be accessed by public in the Company’s website. The website also publishes the most recent CSR activities by the Company, where the CSR content on the website is fully managed by the GCG & CSR Department, not by the Corporate Secretary Division. For the record, the Company up to now has never practiced over-publicity. Every big CSR activity was only covered by 1 – 3 media, although the value could reach billions of rupiah. It is because in helping others, the Company is driven by the heart, over image.

In principle, Modernland adopts and practices the concept of triple bottom line (namely people, planet, profit) equally without any trade-offs among them. In addition, the Company always tries to accommodate the interests of both internal and external stakeholders. The Company realizes that both types of stakeholders are equally crucial to its existence and development. Employees are the Company’s greatest asset as well as one of its internal stakeholders. As one of the CSR actors, the Human Resources Division holds various kinds of training each year to enhance the employees’ personal and professional competencies. In addition, several collective programs have been performed to tighten the relationship amongst employees, and their relationship with local communities, e.g. doing iftar together during Ramadan, holding religious gatherings with orphans, carrying out outings for several days in rural areas, etc. These activities have never been absent for the last four years and the Company has decided to conserve them as a part of its tradition.

As for external stakeholders, i.e. local communities and public, Modernland has performed a number of activities for the last several years including giving scholarships and executing school renovations, planting 1,000 tamarind trees together with the community, hiring many local residents to become employees (around 70% employees are the surrounding communities), building low-cost houses and apartments for the middle-low economic community, giving donations to orphans and natural disaster victims, supporting the Indonesian Red Cross, building mosques, etc.

The CSR investment in 2011 was only Rp250 million while in 2012 has escalated up to Rp894 million or an increase of 257%. Last year the number has almost reached Rp1.7 billion or an increase of 189.4%. This number meets (even exceeds) the Company’s commitment on 0.5% CSR budget from net profit. Furthermore, these escalating numbers of CSR investment over time would not exist without GCG best practice through the top managers’ commitment on regulation compliance and on CSR, and the role of the GCG & CSR Department under them. In short, the increasing effort on CSR reflects not only the CSR commitment by the top managers as the GCG actors, but also the prior increasing level of confidence in regulation compliance, thus GCG is perceived as a precondition for CSR success. Andreas Y. Keban (GCG & CSR Department Head at PT Modernland Realty Tbk)

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