THE CHALLENGE OF IMPLEMENTING CORPORATE SOCIAL RESPONSIBILITY IN
SUSTAINABILITY CERTIFIED PALM OIL MILLS (CASE STUDY PT. X AND PT. Y)
Rachel Yessica Winarti, Yolanda
Masnita Siagian, Maria Ariesta Utha
Faculty of Economics and Business,
Universitas Trisakti, Indonesia
Email: [email protected], [email protected], [email protected]d
|
KEYWORDS Challenge; TOPSIS; Delphi; CSR; Palm oil industry |
ABSTRACT CSR is
the company's responsibility for the impact of its activities and decisions
on society and the environment. Implementation of CSR guided by the
principles of ISO 26000 can optimize CSR efforts in the company. CSR has an
important role in improving people's welfare and reducing environmental
impact, but the implementation of CSR is still not optimal. This shows that
palm oil mills need to make improvement efforts so that CSR implementation
becomes more optimal, the research aims to determine the challenges in
implementing CSR programs and provide recommendations to overcome dominant
challenges. This research used delphi methods to assess the relevance of
challenge and TOPSIS methods for prioritize the challenge. The first step in
formulating improvement efforts is identifying the challenging factors in CSR
implementation. The Delphi method aims to assess the relevance of challenges;
the Delphi results show one additional challenge: "The emergence of the
latest laws and regulations that cause significant changes to existing
operations". Sixteen challenges become input in the TOPSIS method. The
TOPSIS calculation results show three main challenges in this study. These
three challenges include (1) Factor A5, "Company coordination with
stakeholders (government, local communities, society, NGOs) is not good”
0.659984), (2) Factor E5 "The company's regulatory structure is complex
in supporting the implementation of CSR programs" (0.596638), and (3)
Factor D2 "Lack of certainty of economic benefits from technology
investment initiatives that support CSR programs" (0.586047). This
research showed that coordination between stakeholders is the most
challenging factor when a company implements CSR programs. A recommendation
in line with ISO 26000 is implementing a stakeholder engagement strategy
through discussion forums. Regular communication forums will strengthen
collaboration between stakeholders and will facilitate the society or local
community in voicing the need for the program to be funded by the company. |
INTRODUCTION
Palm oil
is a leading commodity in Indonesia. Palm oil is a raw material for various
food, beverage, personal care, and cosmetic products (Livelihoods, 2021; Grand
et al., 2022). The need for palm oil in 2021 is 165 million tons, this figure increased
by 24% compared to six years ago (Shahbandeh, 2022). The development of the
need for palm oil has significantly contributed to employment and the
Indonesian economy. The palm oil industry contributes 3.5% of the total Gross
Domestic Product (GDP). The total workforce absorbed by the palm oil industry
is 16.2 million workers (Ramadan, 2021). The palm oil industry has an important
role in the sustainability of other related industrial businesses and has a
major contribution to the Indonesian economy, but the palm oil industry also
creates negative problems. Some of the negative impacts of the development of
the palm oil industry include deforestation, loss of critical habitat for
endangered species, air pollution, soil and water pollution, soil erosion,
climate change, social conflicts related to land, labor rights issues, loss of
livelihoods, and health issues (SPOTT, 2020). Oil palm was the largest driver,
accounting for almost 40% of deforestation from 2008–2009 in Indonesia (Ritchie
& Roser, 2021). In 2008, the development of oil palm lands led to loss of
customary land rights and community displacement in one district in West
Kalimantan, Indonesia. (SPOTT, 2022). In 2015, around 2.6 million ha burned and
a third was peat land due to the fire and haze crisis in Indonesia (Pacheco et
al., 2017). Various negative impacts that emerged became an initiation for the
palm oil industry to implement sustainability practices as corporate social
responsibility (CSR). CSR through sustainability practices in the palm oil
industry is a form of responsibility for industry actors against the negative
impacts that arise from the industrial processes that are carried out (Yuen
& Lim, 2016).
One of the
efforts of the palm oil industry in implementing sustainability practices is to
fulfill sustainability certification of palm oil. Certification schemes that
regulate sustainability practices include the Roundtable on Sustainable Palm
Oil (RSPO), Indonesian Sustainable Palm Oil (ISPO), and International
Sustainability & Carbon Certification (ISCC) (Majid et al., 2021). The
principles adopted by the RSPO, ISPO, and ISCC certification systems include
(1) legality and responsible business practices, (2) social responsibility, (3)
environmental responsibility (Majid et al., 2021; Sulong et al., 2021;
Chiriac`o et al., 2022). The application of sustainability certification in the
palm oil industry also has environmental, social, and economic implications for
achieving the Sustainable Development Goals (SDGs) (Syahza et al., 2020; Majid
et al., 2021; Chiriac`o et al., 2022). The sustainability practice of the palm
oil industry is not only guided by the RSPO, ISPO, and ISCC principles, but
this practice should also be in synchronize with the seven principles of ISO
26000 (Leoński, 2019) so that this contradicts the notion of greenwashing of
efforts to implement CSR through sustainability certification practices. The
seven principles of ISO 26000 cover (1) Organizational Governance, (2) Human
Rights, (3) Employment Practices, (4) Environment, (5) Fair Operating
Practices, (6) Community Engagement and Development, and (7) Consumer Issues
(Pawlowska et al., 2021). In general, these seven principles serve as a guide
in implementing CSR programs so that company initiatives can have a significant
impact (Leoński, 2019).
Several previous studies by Putri et al. (2022),
Apriani & Zaini (2018), Abdul-Hamid et al. (2020), Paoli et al. (2010), and
Cheah et al. (2023). Putri et al. (2022) focus on challenges related to
institutional (government) aspects; this is an opportunity to develop other
research related to factors other than institutions. Apriani & Zaini (2018)
focuses on challenges that come from within the company; this causes challenges
that come from outside the company not to be considered in preparing the
company's strategy. In contrast to Putri et al. (2022) and Apriani & Zaini
(2018), Abdul Hamid's research et al. (2020) focuses on obstacles related to
social and economic aspects, so Abdul Hamid et al.'s (2020) research does not
link challenges originating from government institutions, company internals,
economic and social conditions Paoli et al. (2010) and Cheah et al. (2023)
analyzes challenges from the company's internal side and economic conditions.
Based on previous research, this research will combine challenges from research
by Putri et al. (2022), Apriani & Zaini (2018), Abdul-Hamid et al. (2020),
Paoli et al. (2010) and Cheah et al. (2023), so that challenges in this
research will be reviewed from the institutional, environmental, social,
economic and company internals aspects.
PT X and
PT Y is a palm oil mill (POM) in Indonesia. These two companies already have RSPO,
ISPO, and ISCC certificate. Implementation of CSR programs at PT X and PT Y
involves various stakeholders, including employees, local community, society,
government, and NGOs. The collaboration of various stakeholders is an effort by
PT X and PT Y in optimizing the implementation of CSR programs (Joseph, 2006).
In the implementation of CSR through the fulfillment of sustainability
certification, which is audited annually by a third party, observations of
discrepancies or potential for improvement were found, namely regarding the
management of handling POM’s waste (RSPO Surveillance Assessment Report, 2023)
One
example of PT X and PT Y are the management of POM’s waste management. This
program manifests the environmental principles in the ISO 26000 guidelines and
RSPO, ISPO, and ISCC, which aim to minimize the negative impacts that arise,
such as environmental pollution. Implementation of a waste management program
that is not yet optimal can potentially pollute the environment, causing
demands from the surrounding community, or can cause material losses (fines),
government sanctions, and create a negative image for the company. The
implementation of a good CSR program is not only a requirement for the legality
of the palm oil industry's operations, but the CSR program will create
wholeness, harmony and sustainability of a conducive environment so that the
sustainability of all can be well maintained (Abdullah, 2017). Based on the
evaluation results of PT X and PT Y shows results that are not optimal. If the
CSR program is not optimal, the company needs to analyze the challenges that
affect the successful implementation of CSR at PT X and PT Y. This study aims
to determine the challenges in the implementation of CSR programs and provide recommendations to overcome
dominant challenges that arise in the implementation of CSR programs.
RESEARCH
METHOD
This research used delphi methods to
assess the relevance of challenge and TOPSIS methods for prioritize the
challenge. The object of this research is PT X, located in West Sumatra and PT Y, which is located in
Central Kalimantan. Selection of PT X and PT Y as an object of research, both
of these objects have been certified starting in 2012, including RSPO, ISPO,
and ISCC. This research took place from February 2023 to June 2023.
Figure 1 is the flow of this
research. The first stage in this research is the identification of challenges
in CSR implementation. The technique used in the challenge identification stage
is a literature study. The literature study stage begins with a search for
challenges in CSR implementation on the Scopus database and the Web of Science;
the keywords in the list of challenges search are “Challenge” or “Barriers” and
“Palm oil industry” and “CSR” and “ISO 26000” or “RSPO” or ”ISPO” or “ISCC.”
Furthermore, the results of the literature study will be validated through a
brainstorming process with sustainability expert from palm oil mills of PT X and
PT Y.
Figure
1. Research Flow
The
literature study results will become the basis for preparing the research
instrument. The instrument in this study will use three questionnaires. The
three questionnaires cover the first stage questionnaire to identify
challenges, the second stage to validate challenges obtained from open-ended
questions from the first stage of the questionnaire, and the third stage to
assess challenges. The first questionnaire aims to identify challenges; this
questionnaire is in the form of a semi-open. The first challenge identification
questionnaire instrument contains a list of challenges from the literature
study and an open question regarding the challenges faced by the expert that
have yet to be identified in the literature study. The second stage of the
questionnaire is in the form of a closed questionnaire. In the second stage of
the questionnaire, experts were asked to rate the relevance of the challenge
using a scale of 0 (not relevant) and 1 (relevant). In stage 1 and 2
questionnaires, a factor was considered relevant if the percentage of experts
who considered the factor relevant was > 75% (Barrios et al., 2021). The
results of identifying challenges will be input in compiling a questionnaire
assessing challenges to CSR implementation. The rating scale used in this study
is shown in Table 1.
Table
1. TOPSIS Scale Evaluation
|
1 |
2 |
3 |
4 |
5 |
|
Very non-inhibiting the
implementation of CSR |
|
Very inhibiting the
implementation of CSR |
||
Experts involved in assessing the challenges of CSR
implementation have criteria (1) have knowledge related to research topics, (2)
have experience related to research topics, (3) are willing to participate in
research, and (4) have the ability to communicate their knowledge and
experience (Etikan et al., 2016). In this study, the
respondents had at least five years of experience. Table 2 is a list of the
experts involved.
Table
2. Respondents’ Profile
|
Division |
Total |
Percentage |
|
Sustainability |
5 |
50 % |
|
EHS |
5 |
50 % |
|
Location |
Total |
Percentage |
|
PKS X, Sumatera Barat |
5 |
50 % |
|
PKS Y, Kalimantan Tengah |
5 |
50 % |
|
Role |
Total |
Percentage |
|
Manager |
7 |
70 % |
|
Supervisor |
3 |
30 % |
|
Length of Work |
Total |
Percentage |
|
5-10 years |
1 |
10 % |
|
10-15 years |
5 |
50 % |
|
>15 years |
4 |
40 % |
|
Length of Work Average: 14 years |
|
|
Figure 2. Show the methods for prioritizing the
challenge.
Figure 2. TOPSIS Calculating Steps
Processing data in this study using TOPSIS (Technique for
Order of Preference by Similarity to Ideal Solution). The reason for choosing
the TOPSIS method is that this technique has a higher level of accuracy than
other MCDM (Multi-Criteria Decision Making) methods (Widianta et al., 2018),
and the TOPSIS method has a simple calculation mechanism. According to Widianta
et al. (2018), TOPSIS has the highest accuracy rate of 95%. Other MCDM methods
have a lower accuracy rate than TOPSIS, including PROMENTHEE at 93.34%, SAW at
81.67%, and AHP at 50%. The steps for calculating the TOPSIS method are shown
in Figure 2.
RESULTS AND
DISCUSSION
Results
The results sub-chapter identifies
challenges through literature studies, assesses the relevance of challenges to
the actual conditions of the palm oil mills, and ranks challenges using the
TOPSIS method.
Literature study
results
The
results of this study include (1) a list of identification challenges based on
the results of the study of literature and (2) the calculation results of the
TOPSIS method. The results of the identification of challenges are shown in table
3.
Tabel 3. Hasil
Studi Literature
|
Aspect |
Definition |
Code |
Challenge |
Ref* |
||||
|
A. Institutional |
Challenges related to legality
and company relations with government and communities |
A1 |
No land legality |
[1] |
||||
|
A2 |
No business legality |
[1] |
||||||
|
A3 |
There is no legality of the oil
palm seeds used |
[1] |
||||||
|
A4 |
The majority of farmer
organizations or cooperatives are not active |
[1] |
||||||
|
A5 |
Company coordination with
stakeholders (government, local communities, society, NGOs) is not good |
[2] |
||||||
|
B. Environment |
Challenges related to the
company's efforts to minimize the negative impact of waste felt by the
community |
B1 |
Lack of clarity on standards or
regulations related to the environmental management of oil palm plantations |
[1];[3] |
||||
|
Aspect |
Definition |
Code |
Challenge |
Ref* |
|
|||
|
|
|
B2 |
Lack of use of automation system
technology (real-time visibility) for operational monitoring of CSR programs
on environmental management |
[3] |
|
|||
|
C. Social |
Challenges related to the social conditions of the surrounding local
community / society |
C1 |
Lack of competent workers who
want to work in rural areas (company location) |
[5] |
|
|||
|
C2 |
Lack of fresh graduate workers
who want to work in rural areas (company locations) |
[5] |
|
|||||
|
C3 |
Lack of community support or
participation in the formulation and implementation of CSR |
[2] |
|
|||||
|
D. Economy |
Challenges related to financial
conditions |
D1 |
The amount of capital investment
for technology that supports CSR programs |
[3],[4] |
|
|||
|
D2 |
Lack of certainty of economic
benefits from technology investment initiatives that support CSR programs |
[3] |
|
|||||
|
D3 |
Limited corporate financing for
CSR programs |
[2];[3] |
|
|||||
|
E. Company internals |
Challenges that arise from the
internal party implementing the CSR program |
E1 |
The CSR program plan must still
be integrated with government or community planning. |
[2] |
|
|||
|
E2 |
CSR program planning does not
involve external stakeholders (government, local communities, society, NGOs) |
[2] |
|
|||||
|
E3 |
Lack of Internet availability and
IT facilities |
[3] |
|
|||||
|
E4 |
Lack of monitoring of the
implementation of CSR programs that have been approved to be implemented |
[3],[4] |
|
|||||
|
E5 |
The complexity of the company's
regulatory structure in supporting the implementation of CSR programs |
[4] |
|
|||||
|
[1] (E. I. K. Putri et
al., 2022); [2] (Apriani & Zaini,
2018) ; [3] (Abdul-Hamid et al.,
2020), [4] (Paoli et al., 2010), [5] (Cheah et al., 2023) |
|
|||||||
Delphi results
Table 3 shows the results of a
literature study on challenges in implementing CSR in the palm oil mills. The
results of this literature study will then go through a relevance assessment
process using the Delphi method. This stage aims to see the suitability of the
challenges in the literature study with actual conditions. Delphi, in this
study, took place in two rounds. The first round aims to assess the relevance
and identify challenges that have yet to be found in the literature study. In
contrast, the second round aims to validate the Delphi results in the second
round. Table 4 shows the results of the first and second rounds of Delphi.
Table 4. Delphi Results
|
No |
Challenge code |
Delphi Round 1 |
Delphi Round 2 |
||||||||||
|
Mill X & Y |
LA Hitung |
LA standard |
Result* |
Mill X & Y |
LA Hitung |
LA standard |
Result* |
||||||
|
Relevant |
Not Relevant
|
Total |
Relevant |
Not Relevant
|
Total |
||||||||
|
1 |
A1 |
7 |
3 |
10 |
70% |
0,75 |
Not Relevant |
Delete Delphi round 1 |
|||||
|
2 |
A2 |
7 |
3 |
10 |
70% |
0,75 |
Not Relevant |
Delete Delphi round 1 |
|||||
|
3 |
A3 |
8 |
2 |
10 |
80% |
0,75 |
Relevant |
8 |
2 |
10 |
0,8 |
0,75 |
Relevant |
|
4 |
A4 |
8 |
2 |
10 |
80% |
0,75 |
Relevant |
8 |
2 |
10 |
0,8 |
0,75 |
Relevant |
|
5 |
A5 |
8 |
2 |
10 |
80% |
0,75 |
Relevant |
8 |
2 |
10 |
0,8 |
0,75 |
Relevant |
|
6 |
B1 |
8 |
2 |
10 |
80% |
0,75 |
Relevant |
8 |
2 |
10 |
0,8 |
0,75 |
Relevant |
|
7 |
B2 |
6 |
4 |
10 |
60% |
0,75 |
Not Relevant |
Delete Delphi round 1 |
|||||
|
8 |
C1 |
8 |
2 |
10 |
80% |
0,75 |
Relevant |
8 |
2 |
10 |
0,8 |
0,75 |
Relevant |
|
9 |
C2 |
8 |
2 |
10 |
80% |
0,75 |
Relevant |
8 |
2 |
10 |
0,8 |
0,75 |
Relevant |
|
10 |
C3 |
8 |
2 |
10 |
80% |
0,75 |
Relevant |
8 |
2 |
10 |
0,8 |
0,75 |
Relevant |
|
11 |
D1 |
9 |
1 |
10 |
90% |
0,75 |
Relevant |
9 |
1 |
10 |
0,9 |
0,75 |
Relevant |
|
12 |
D2 |
8 |
2 |
10 |
80% |
0,75 |
Relevant |
8 |
2 |
10 |
0,8 |
0,75 |
Relevant |
|
13 |
D3 |
8 |
2 |
10 |
80% |
0,75 |
Relevant |
8 |
2 |
10 |
0,8 |
0,75 |
Relevant |
|
14 |
E1 |
7 |
3 |
10 |
70% |
0,75 |
Not Relevant |
Delete Delphi round 1 |
|||||
|
15 |
E2 |
8 |
2 |
10 |
80% |
0,75 |
Relevant |
8 |
2 |
10 |
0,8 |
0,75 |
Relevant |
|
16 |
E3 |
9 |
1 |
10 |
90% |
0,75 |
Relevant |
9 |
1 |
10 |
0,9 |
0,75 |
Relevant |
|
17 |
E4 |
8 |
2 |
10 |
80% |
0,75 |
Relevant |
8 |
2 |
10 |
0,8 |
0,75 |
Relevant |
|
18 |
E5 |
9 |
1 |
10 |
90% |
0,75 |
Relevant |
9 |
1 |
10 |
0,9 |
0,75 |
Relevant |
|
19 |
T1* |
New challenge based on expert opinion |
8 |
2 |
10 |
0,8 |
0,75 |
Relevant |
|||||
|
*T1 :
The emergence of the latest laws and regulations
that cause significant changes to existing operations will be a challenge
that inhibiting the implementation of CSR |
|||||||||||||
The results of the literature study produced eighteen challenges; four
challenges had an agreement level <0.75, so they were considered irrelevant.
Delphi round 1 resulted in 1 new challenge, namely T1 (: The emergence of the
latest laws and regulations that cause significant changes to existing
operations will be a challenge that inhibiting the implementation of CSR). The
results of Delphi Round 1 are fifteen challenges that will go through the
expert relevance assessment process. The results of Delphi round 2 showed that
the fifteen challenges had an LA value > 0.75, so these were input in the
TOPSIS assessment questionnaire.
TOPSIS Results
The assessments
of the ten experts on the fifteen challenges resulting from the Delphi method
were then assessed using a scale of 1 (not very inhibiting) to a scale of 5
(very inhibiting). The results of this assessment then go through the
calculation process as shown in Figure 2, resulting in a calculation as shown
in Table 5.
Table 5. TOPSIS Calculating Results
|
No |
Code |
Challenge |
C* |
Rank |
|
|
1 |
A3 |
There
is no legality of the oil palm seeds used |
0,537949 |
4 |
|
|
2 |
A4 |
The
majority of farmer organizations or cooperatives are not active |
0,371925 |
11 |
|
|
A5 |
Company
coordination with stakeholders (government, local communities, society, NGOs)
is not good |
0,659984 |
1 |
||
|
4 |
B1 |
Lack
of clarity on standards or regulations related to the environmental
management of oil palm plantations |
0,284429 |
12 |
|
|
6 |
C1 |
Lack
of competent workers who want to work in rural areas (company location) |
0,40202 |
10 |
|
|
7 |
C2 |
Lack
of fresh graduate workers who want to work in rural areas (company locations) |
0,520398 |
6 |
|
|
8 |
C3 |
Lack
of community support or participation in the formulation and implementation
of CSR |
0,421127 |
9 |
|
|
9 |
D1 |
The
amount of capital investment for technology that supports CSR programs |
0,435267 |
8 |
|
|
D2 |
Lack of
certainty of economic benefits from technology investment initiatives that
support CSR programs |
0,586047 |
3 |
||
|
11 |
D3 |
Limited
corporate financing for CSR programs |
0,525324 |
5 |
|
|
12 |
E2 |
CSR
program planning does not involve external stakeholders (government, local
communities, society, NGOs) |
0,441697 |
7 |
|
|
13 |
E3 |
Lack
of Internet availability and IT facilities |
0,264676 |
13 |
|
|
14 |
E4 |
Lack
of monitoring of the implementation of CSR programs that have been approved
to be implemented |
0,217887 |
14 |
|
|
E5 |
The complexity
of the company's regulatory structure in supporting the implementation of CSR
programs |
0,596638 |
2 |
||
|
16 |
T1 |
The emergence of the latest laws and regulations
that cause significant changes to existing operations will be a challenge
that hinders the implementation of CSR |
0,170447 |
15 |
|
Discussion
Challenge Identification Analysis Results
Based on data processing results, fifteen challenges
inhibiting the implementation of CSR in the sustainability certified palm oil
mills. The fifteen challenges cover four aspects, namely institutional aspects
(A), environmental aspects (B), economic aspects (C), and internal company
aspects (D). After going through the relevance assessment process, there is one
additional challenge, namely "T1. The emergence of the latest laws and
regulations causes significant changes to existing operations”. This challenge
was a suggestion from respondent 1 in the Delphi round 1 round. However, in the
second round, other respondents agreed to challenge T1 as a challenge that
inhibit CSR implementation based on ISO 26000 in the sustainability certified
palm oil mills. Changes to ISPO legislation through Presidential Regulation No.
44 in 2020. Comparison between the old ISPO (2015) and the new ISPO (2020), as
shown in Table 6, the emergence of new regulations in the palm oil business to
business (B2B) scheme or the implementation of a carbon trading or tax system
(carbon trading or carbon tax).
However, there were policy dan regulatory vacuums and
complexity at the sub-national level which made the implementation of the ISPO
certification not run smoothly. One of
the things that has become an obstacle to ISPO certification is the
implementation of CSR that is not in line with ISO 26000 in the form of company
coordination with stakeholders (government, community, local community, NGOs).
Another obstacle relates to the uncertain response of local governments.
Local-level governments also experienced uncertainty in following up on ISPO's
regulations due to the many existing regulations and policies that are still in
effect and have the potential to conflict and even collide with other
regulations showed the many ways of responding to the oil palm plantation
certification process. According to (E. I. K. Putri et al., 2022) this is also a challenge for
the Indonesian government by continuing to highlight the focus that exists at
every level of authority related to the implementation of ISPO certification in
the country so as to speed up the certification process.
Table 6. Differences between New ISPO and Old ISPO
|
Aspect |
NEW
ISPO (2020) |
OLD
ISPO (2015) |
|
Base regulation |
Presidential instruction No.44 |
Ministry of agriculture regulation No.11 |
|
The purpose |
1. Assure
and improve management and development of oil palm plantations according to
ISPO principles and criteria 2. Improve
acceptance and competitiveness of Indonesian palm oil plantations
products in national and international markets. 3. Accelerated
efforts to reduce greenhouse gas emissions. |
1. Ensuring
palm oil companies apply the laws and regulations in Indonesia. 2. Contribute
to reducing greenhouse gas emissions. |
|
Principles |
1. Compliance
with rules and regulation 2. Application
of good plantation practices 3. Environmental
management, natural resources and biodiversity 4. Responsibilities
for workers 5. Social
responsibilities and community economic empowerment 6. Application
of transparency 7. Enhancement
of business sustainability |
1. Plantation
legality 2. Plantation
management 3. Protect
of natural primary forests and peatlands 4. Environmental
management and monitoring 5. Responsibilities
for workers 6. Social
responsibilities and community economic 7. Enhancement
of business sustainability |
|
Institutional |
The ISPO committee is chaired by a Ministry
of Agriculture official, but members include government officials, business
leaders, academics, civil society organizations and independent observers; Decision making on certification carried
out by the Institute for Certification of ISPO (thus decreasing dependency on
government bureaucracy). |
The ISPO commission only consists of
government officials. Decision making on ISPO
certification is carried out by the
ISPO Commission (thus fully dependent on the government). |
|
Obligation to have ISPO certification |
All growers, companies and smallholders. Smallholders are required to have a
certificate of ISPO within 5 years after this regulation is published |
Only companies are required to hold ISPO
certificate. For smallholders ISPO certification is
only voluntary |
|
Penalty |
Given by the Minister in the form of
reprimand written, fines, freezing certificate ISPO and / or revocation of
the ISPO certificate, revocation of business license of plantation, |
Provided by the Governor or Regent as
written warnings, a downgrading of plantation
class and eventually revocation of business licenses. |
|
Financing |
For companies, charged to the applicant.
For smallholders, funds are available
through the State Budget (APBN), Regional Budgets (APBD) and other legitimate
sources. |
Change to the applicant (only companies) |
TOPSIS Analysis Results
The TOPSIS calculation results show that there are three
most influential challenges in CSR implementation. These three factors include
(1) Factor A5 "Company coordination with stakeholders (government, local
communities, society, NGOs) is not good" (0.659984), (2) Factor E5
"The complexity of the company's regulatory structure in supporting the
implementing CSR programs" (0.596638) and (3) Factor D2 "Lack of
certainty of economic benefits from technology investment initiatives that
support CSR programs" (0.586047). The details regarding the analysis of
the three challenges are as follows:
1) Challenge A5 "Company coordination with stakeholders
(government, local communities, society, NGOs) is not good
Challenge
A5 "The coordination between the company and stakeholders (government,
community, local community, NGO) is not good" is the challenge with the
highest weight in this study. Stakeholders involved in the palm oil industry include
(1) shareholders, (2) local communities, (3) NGOs, (4) Government, (5) Buyers,
(6) Financiers & (7) Competitors. The challenge related to coordinating
palm oil mills with the community is related to the social license to operate
(SLO). SLO is the basic contract for the legitimacy of company-specific
activities or projects where these activities can harm third parties, such as
communities and local social groups. Companies need SLO from society,
communities, and social groups. Maintaining SLO is a challenge for palm oil
producers to coordinate the impacts that arise for society, communities, and
social groups and convince the public about the efforts of palm oil producers
to overcome the impacts that arise. SLO or legitimacy is an acceptance and acknowledgment
of the authority given by the community for the power that has been given to
the company (Surbakti, 2007) so it is very important for moral ideals and
maintaining corporate sustainability (Demuijnck & Fasterling, 2016). These
results align with the research of Apriani & Zaini (2018), which revealed
on the implementation of CSR for palm oil producers in the East Kutai Regency.
The lack of coordination in the case of palm oil producers in Kutai Regency was
shown by the absence of representatives of community leaders in formulating CSR
programs. Challenge A5 also aligns with Sameer's research (2021) regarding CSR
implementation, lack of coordination & awareness is an obstacle to the
success of the CSR program formulated by the company (Sameer, 2021).
Furthermore,
NGOs have a role in monitoring CSR implementation of sustainability certified palm oil mills (through criticism and discrepancies by
companies) and making business CSR a source of funding (Leblanc, 2013). NGOs
have a role in putting pressure on the government and companies, so NGOs often
provide criticism and suggestions for improvements to government policies and
company policies related to sustainability. According to Leblanc (2013), NGOs
have an important role in overseeing the implementation of CSR. However, NGOs
are also interested in allying with businesses to obtain funding sources other than
government funding. The dual role of NGOs often results in biased criticism.
For
example, company program proposals prioritize criteria according to the
company's CSR budget to not harm the company's business; this is often
different from where NGOs prioritize broad program coverage (which requires a
large amount of money). This difference in point of view is a challenge for
companies and NGOs to find a compromise between the program proposed by the NGO
and the costs owned by the CSR provider company. According to Christian &
Limaho, (2020) coordination between companies and NGOs is a challenge in
itself. This relates to the perspective of an NGO, which is different from that
of a company. Companies use a business perspective to seek profit, while NGOs are
not profit oriented. This difference in perspective will result in different
priorities for CSR programs between companies and NGOs.
2) Challenge E5 "The complexity of the corporate
regulatory structure in supporting the implementation of CSR programs."
Good CSR simplifies the relationship between a company
and its stakeholders. CSR issues can be managed to generate profit for a
company. If a company communicates its CSR well, it can improve the
organization's financial performance. Even if companies spend many resources to
engage in CSR, market equality will compensate for the cost of CSR with profits
(P et al., 2020). The challenge of the complexity of the company's regulatory
structure is related to the company's bureaucratic chain, which is getting longer,
so approving a CSR program takes a long time.
The involvement of various levels of government also
demonstrates the complex regulatory structure. The complexity of regulations
involving various parties is illustrated in identifying needs that will be packaged
in the CSR program. This identification process involves various levels of
government, starting from the lurch, sub-district head to the government and
provincial level offices. The complexity of the company's internal regulations
as well as the complexity of government regulations, is a challenge in the
implementation of CSR based on ISO 26000 in sustainability certified palm oil
mills.
The complexity of the company's regulatory structure is a
challenge with the second highest weight, this is in line with the results of
research by Paoli et al (2010). Research by Paoli et al (2010) states that the
complexity of a company's regulations regarding permits for operational
activities has an impact on the speed of execution or the implementation of
company activities that take a long time because they have to follow complex
procedures. Companies should create regulatory structures that better support
the execution of CSR program implementation to achieve corporate
sustainability. According to Paoli et al (2010), to create a regulatory
structure that better supports the execution of the implementation of this CSR
program also requires comprehensive coordinated action from top management to
workforce in the field so that the scale and speed of change can be ensured to
be sufficient to provide long-term benefits for the company's sustainability.
3) Challenge D2 "Lack of certainty of economic
benefits from technology investment initiatives that support CSR
programs."
One of the priorities for the development of the
CSR program is related to the digitization of the agricultural sector and the
use of technology to optimize the performance of the production process. Palm
oil producers have implemented CSR programs through research financing to
mitigate technological agricultural disruption or optimize production process
performance. Palm oil mills hope that through research funding, the performance
of the palm oil production process will become more optimal and be able to
reduce production costs. The goals are often not achieved because financing for
research in the technology sector is still on a laboratory scale, or its use on
a large scale (mass production) requires various process improvements and
adjustments so that the expected economic benefits are easier to realize.
Lack of certainty of economic benefits from
investment initiatives that support CSR programs is a challenge with the third
highest weight. This challenge is in line with the results of research by
Abdul-Hamid et al (2020) regarding challenges in utilizing technology in
achieving sustainability in palm oil mills. A company's future can be
threatened by failed investments because technology often requires high
investment or large initial capital, and in extreme conditions, high investment
is often very challenging and risky. This raises the fear and doubt of many
companies to start investing. Effective economic benefits are needed to
increase investment security. This can be achieved when academic theory is
proven effective with practice and provides a clear picture of the necessary
economic benefits, it is very necessary low-cost technology that is technically
and legally profitable to ensure the production process is effective and
efficient so that it can be accepted by companies.
Based on the analysis of this study, the challenges of
the palm oil mills in implementing ISO 26000-based CSR in sustainability
certified palm oil mills. The biggest challenge in implementing ISO 26000-based
CSR in sustainability certified palm oil mills is poor coordination between
companies, governments, and local communities/society. One of the strategies
for palm oil producers is to strengthen collaboration with the public and the
local community; this strategy can be implemented by periodically holding a
communication forum. This forum will facilitate the local community/society in
voicing the needs of programs that the company will fund.
Recommendation Analaysis
Stakeholder engagement is the main key to the success of
sustainability practices (Wardhani and Rahadian, 2021). The process used by the
organization must involve stakeholders; this aims to create collaboration
between stakeholders so that sustainable development goals will be achieved.
Stakeholders in the palm oil industry include company employees, suppliers,
consumers or customers, creditors, shareholders, the community and the
government (Waled Najib Moqbel et al., 2014). Stakeholders engagement is a
solution to face challenges A5 "Company coordination with stakeholders (government,
community, local community, NGOs) is not good." According to informant 1
in this study, improving stakeholder coordination through organizing dialogue
forums to formulate CSR programs. The dialog aligns with the research of
Ansu-Mensah et al. (2021), which considers dialogue forums as a form of
activity in implementing diplomatic strategies. The diplomacy strategy is one
of the strategies to increase stakeholder engagement.
The company's diplomatic strategy is a designation
for the company's approach to farmer groups and the surrounding community for
joint dialogue in a forum. This dialogue forum is a means for the community and
farmer groups to express their needs in the CSR program of palm oil producers.
This strategy is expected to create a feeling of "feeling understood"
within the community and farmer groups to impact increased engagement.
One of the efforts to increase the involvement of
plantation companies, traders and processors, as well as producers and
retailers of consumer goods), as well as non-governmental organizations,
financial institutions, and consulting institutions in CSR practices, is to
establish mutually agreed governance. Another effort that can be made is to
hold a dialogue to build knowledge about CSR implementation. This knowledge is
expected to generate commitment among stakeholders so that the implementation
of the CSR program runs smoothly.
Another alternative strategy to increase
stakeholder collaboration is implementing a reward system. Companies that
provide CSR can reward people who actively provide CSR program ideas that are
right on target. Reward systems can also be given to researchers who can create
technologies that support the implementation of CSR, for example, researchers
developing technologies that can improve environmental performance.
CONCLUSION
CSR is the company's responsibility for
the impact of its activities and decisions on society and the environment.
Implementation of CSR guided by the principles of ISO 26000 can optimize CSR
efforts in the company. CSR has an important role in improving people's welfare
and reducing environmental impact, but the implementation of CSR is still not
optimal. CSR implementation is influenced by three main challenges; (1) factor A5
"Company coordination with stakeholders (government, local communities,
society, NGOs) is not good" (0.659984), (2) factor E5 "The complexity of the
company's regulatory structure in supporting the implementation of CSR
programs" (0.596638), and (3) factor D2 "Lack of certainty of
economic benefits from technology investment initiatives that support CSR
programs" (0.586047).
Activity
recommendations for facing challenges in implementing CSR in line with ISO
26000 are implementing a stakeholder engagement strategy through discussion
forums. One of the activities in the strategy of palm oil producers is to
strengthen collaboration with society and local communities. This strategy can
be implemented by holding regular communication forums. This forum will
facilitate the society or local community in voicing the need for the program
to be funded by the company. Furthermore, strengthen cooperation with the
Indonesian government by highlighting the existing focus at each level of
authority regarding the implementation of ISPO certification in the country to
speed up the certification process.
Future research can involve more palm
oil mills to make the research results more robust. This study has yet to
analyze the relationship between challenges, so future research can analyze
challenges using DEMATEL or structural models.
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Copyright holders:
Rachel Yessica Winarti, Yolanda
Masnita Siagian, Maria Ariesta Utha (2023)
First publication right:
Devotion - Journal of Research and Community
Service
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