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The relationship between CSR and competitiveness: the Indonesian case

Hofland, Irene (2012) The relationship between CSR and competitiveness: the Indonesian case.

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Abstract: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. Alongside the economic growth, environmental and social issues are also growing, but the Indonesian culture does not support sustainable behaviour. Therefore, Indonesia is the first country in the world to make Corporate Social Responsibility mandatory by Law instead of practices being voluntarily and not obliged. In the growth path towards becoming a developed country, the government has obliged Indonesian companies to limit their environmental and social impacts by implementing sustainable practices. To permit the synergy of policy intervention and effective implementation, it is generally expected that this must not affect the competitiveness of these companies in a negative way. This is the basis of this study, which examines if mandatory CSR policies have a positive effect on the competitive advantage of Indonesian companies. It is anticipated that effectiveness of policy implementation may be achieved where there is a positive relationship between CSR practices and competitiveness, which makes the investment in CSR practice 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. Finally, 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 than on environmental issues.
Item Type:Essay (Master)
Indonesian Netherlands Association
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration MSc (60644)
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