Corporate Social Responsibility in the ASEAN Region1

Introduction
The Association of Southeast Asian Nations (ASEAN) was established on 8 August
1967 in Bangkok by the five original Member Countries, namely, Indonesia, Malaysia,
Philippines, Singapore, and Thailand. Brunei Darussalam joined on 8 January 1984, Vietnam
on 28 July 1995, Lao PDR and Myanmar on 23 July 1997, and Cambodia on 30 April 1999.
The region has a total area of 4.5 million square kilometers.

In 2006, the ASEAN region had a population of about 560 million, a combined gross
domestic product of almost US$ 1,100 billion, and a total trade of about US$ 1,400 billion.
The diversity of the region is apparent in the fact that the largest country in terms of land area
is 2700 times larger than the smallest country; the country with the largest population has 580
times more people than the smallest country; and the richest country has a GDP per capita
that is 145 times the poorest country.

Paper presented by Dr. Filemon A. Uriarte, Jr., Executive Director, ASEAN Foundation, during the LCF CSR
Conference 2008 held at the Shangri-la Hotel, Makati City, Philippines on 16-18 July 2008.

The ASEAN Declaration states that the aims and purposes of the Association are:
(a) to accelerate economic growth, social progress and cultural development in the region,
and (b) to promote regional peace and stability through abiding respect for justice and the
rule of law in the relationship among countries in the region and adherence to the principles
of the United Nations Charter. In 2003 the ASEAN Leaders resolved that an ASEAN
Community shall be established by 2015. In this connection, the Leaders adopted the ASEAN
Charter during their Summit in Singapore in 2007.

The governments of the ten ASEAN countries established the ASEAN Foundation on
15 December 1997 during the 30th ASEAN Commemorative Summit of ASEAN Leaders held
in Kuala Lumpur, Malaysia. The Memorandum of Understanding on the establishment of the
ASEAN Foundation was revised in July 2000 and ratified by all ten member countries in July
2007. The ASEAN Foundation is now enshrined in Article 15 of the ASEAN Charter.
The Foundation has two objectives:

Promote greater awareness of ASEAN and greater interaction among the peoples of
ASEAN as well as their wider participation in ASEANs activities inter alia through
human resources development that will enable them to realize their full potential and
capacity to contribute to progress of ASEAN Member States as productive and
responsible members of society.

Endeavor to contribute to the evolution of a development cooperation strategy that

promotes mutual assistance, equitable economic development, and the alleviation of
poverty.

Academic, cultural, economic, social and other relevant government institutions and
bona fide non-governmental organizations of ASEAN member countries are eligible for
assistance from the Foundation in conformity with its stated objectives.
As of March 2008, the ASEAN Foundation has supported 121 projects in the areas of
social development, science and technology, environment and culture and information
amounting to $17.6 million. Of these, 91 projects have been completed amounting to $11.36
million while 30 projects are on-going amounting to $6.24 million.
Corporate Social Responsibility
For this conference, I have been requested to speak on corporate social responsibility
in the ASEAN region. In January 2007, the ASEAN Foundation organized a seminar in
Jakarta on Good Corporate and Social Governance in Promoting ASEANs Regional
Integration which was attended by senior government officials and top corporate executives
from several ASEAN countries including the Malaysian Institute of Corporate Affairs, PTT
Thailand, Indonesia Business Links, Indonesian Forum for Corporate Governance and others.
This marked the ASEAN Foundations initial attempt to become involved in issues related to
corporate governance and social responsibility. Unfortunately, there have not been many
studies on CSR practices covering the ASEAN countries. Even the papers presented during
the ASEAN Foundations seminar covered mostly the principles and global trends in CSR
rather than the actual status and practices in countries of the region.
There are however four notable studies and publications on CSR covering some
countries of the ASEAN region that came out during the past several years. In December
2005, the Asia-Pacific Economic Cooperation (APEC) published a report on Corporate
Social Responsibility in the APEC Region: Current Status and Implications containing the
results of the study conducted in 14 countries in the Asia-Pacific region, including five
ASEAN countries, namely, Indonesia, Philippines, Singapore, Thailand and Vietnam. In
December 2001, the United Nations Research Institute for Social Development published a
report on Corporate Social Responsibility in Indonesia. A more recent article by Edward
Manik appeared in the June 2008 issue of Frontier entitled Corporate Social Responsibility:
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The Indonesian Context describing several good examples of CSR programs by Indonesian
corporations. In August 2005, Dr. J. L. Gonzales III, a professor in Golden Gate University,
published a paper on Corporate Social Responsibility in Asia providing an overview of CSR
and its impact on social development with special emphasis on Asia.
The APEC report is the most comprehensive of the four publications. It identifies the
similarities in CSR practices among the countries of the region, describes the patterns and
challenges in CSR activities in both the developed and developing countries, and provides
detailed observations regarding CSR activities and practices in each of the countries covered
by the study.
According to the APEC report, the following similarities can be noted in CSR
practices and activities in countries of the Asia-Pacific region:

The origins and conceptualization of CSR are rooted in the historical and cultural
traditions of each country and deeply influenced by ethical concepts and religious
practice.

CSR is gradually moving from its historical focus on business philanthropy to a

broader set of activities that engage business with the full range of its stakeholders
and integrate the practice of CSR into the core strategy of the organization.

Efforts at measurement and reporting are growing rapidly in the belief that formal
monitoring and evaluation of outcomes will enhance the credibility of CSR and make
it easier to substantiate.

CSR is evolving in response to profound external forces, including meeting legal and
regulatory obligations and responding to the elite and broader public opinions that
demand higher standards of accountability, for example, meeting environmental
requirements and assuring appropriate labor standards throughout the supply chain.

Companies are increasingly turning to partnerships with other stakeholders including

both governments and non-government organizations in implementing CSR activities.

Despite overall similarities among countries in the region, there are notable
differences between the experiences of the developed countries and those of the developing
countries.
The CSR activities in the developed countries tend to have the following patterns:

There is great emphasis on the importance of environmental stewardship and the

strengthening of environmental management practices.

There is strong and active civil society involvement.

An important CSR driver is the management of supply chain, including links to

production in developing economies, often in response to well-articulated consumer
concerns or activism.

There is tendency to have strong traditions of community outreach including

corporate community investment that in both concept and practice extends beyond
pure charity or philanthropy.

Companies are increasingly engaged in strategic partnerships with stakeholders within

communities in which they operate for mutual benefit.

In the case of industrialized and developed countries of the region, the major CSR
challenges include (a) finding appropriate responses to globalization, (b) identifying and
addressing gaps in CSR practices, (c) developing common standards of good practice
throughout the supply chain, and (d) assuring exemplary corporate behavior worldwide.
On the other hand, the practice of CSR in the developing countries tends to have the
following patterns:

There is tendency to emphasize the role that multinational enterprises play in

importing good CSR practices, which are then emulated by the local corporate
community.

The key drivers for CSR are the requirements of the global marketplace and their
supply chains, for example, there are strong incentives for exporters to adopt
appropriate practices (e.g. human rights, labor practices, environmental practices and
food safety) to access markets or to attract overseas investment.

Where there are weaker regulatory frameworks or more limited capacity to enforce
legislation, there is tendency for global protocols to influence CSR practices to
overcome local weakness and promote the capacity of local businesses to compete in
global markets.

The major challenges differ from those of developed countries in that they generally
relate to (a) raising further awareness of CSR, (b) building capacity within existing
institutions that can drive the adoption of CSR, (c) making the case to the local business
community to adopt CSR, and (d) transferring competencies to individual companies.
For the five ASEAN countries covered by the APEC study, the following observations
are made.
Indonesia

The state of CSR is still at its early stages but the development indicates encouraging
signs with Indonesian companies, especially those operating in the global market,
becoming increasingly aware that they are required to balance the social, economic
and environmental components of their business, while building shareholder value.

The stakeholder concept is not new for the Indonesian since the concept of gotong
royong, whereby social responsibility is relevant to all stakeholders of a community,
is imbedded in the Indonesian culture.

The promotion of CSR has been marked with various initiatives in the government
sector, private sector, by some NGOs, and even a combination of various
stakeholders.

Most companies are in the compliance stage of the CSR organizational learning
curve, where they adopt policy-based compliance as a cost of doing business; but
some have reached the managerial stage, where they embed the societal issue in
their core management process; and a few have even reached the strategic stage,
where they integrate the societal issue in their core business strategies.
Philippines

The birth of the CSR concept and its initial practice can be traced back to the 1950s
and has increased in significance with latest recorded corporate giving (2002-2004)
increasing three-fold to P2.6 billion in a period of ten years.

Market forces have been the major drivers of CSR behavior with corporations and
private institutions organizing and involving themselves in CSR activities not only as
tactical responses to potential crises but also in acknowledgment of the fact that
businesses could not possibly thrive in an environment where the majority of the
population are poor.

Sustaining the commitment to and resources available for CSR are the main
challenges as social problems persist amidst the worsening economic condition of the
country.

Most CSR efforts are philanthropic in nature with education and health being the
main recipients.

Internal expressions of CSR, that is, linking it to the day to day operations of the
organization, are practiced with companies promoting employee involvement in CSR.

Leaders who play a significant role in strengthening CSR commitment within an

organization are the principal agents for the CSR promotion strategy.
Singapore

The development of CSR has been influenced by its unique characteristics as a city
state that has achieved great success in an economy where the government remains a
key architect of the economy and has considerable influence over corporate behavior.

The government-centric approach influences CSR approaches with much emphasis on

compliance with legislative requirements as a means of achieving and regulating
socially responsible behavior.
Thailand

The practice of CSR is in an early stage of development and is substantially

influenced by religious beliefs and traditional norms of ethical practice.
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The full integration of CSR into business management at the strategic level is not yet
widely evident reflecting both an insufficient commitment to the concept on the part
of top management and a general perception that CSR is primarily business
philanthropy.

Engagement with the NGO sector deals with broader aspects of CSR, including sound
environmental practices and social development while engagement with government
emphasizes compliance with environmental, health, labor and safety standards.

The CSR challenges include: (a) narrow perception of CSR by many leaders as
merely encompassing philanthropic activities in the public relations function; (b) the
threat of an economic downturn; and (c) negative perceptions of standards related to
CSR as another form of trade barrier.
Vietnam

CSR activities are regulated and supervised by the government and corporate social
policies observe state regulations, which are outlined in the companies annual plans.

The CSR thrust includes meeting the requirements of the import partners, operating in
a favorable working environment, avoiding conflicts and disputes with local labor,
and to some extent philanthropy.

Enterprises and government are the two main players in the promotion of CSR where
enterprises determine the success of CSR and government promulgates policies,
supervises the enforcement of regulations and provides information on CSR issues.

The main challenge is to raise the level of awareness of CSR since generally
consumers have limited appreciation of CSR and fail to associate it in their choice of
products to buy and do not relate CSR with social concerns.

The United Nations Research Institute for Social Development report on Corporate
Social Responsibility in Indonesia asks and answers two questions: Do CSR and
accompanying voluntary initiatives have the capacity to change how TNCs really behave in
their day-to-day operations? At this stage of its development, and in the context of the latest
crisis, is CSR relevant to Indonesia?
In response to the first question, the report states: While it is fair to say that CSR
makes a positive contribution to the human rights of those working in TNCs, it is also fair to
say that it only makes a difference to those few corporations targeted by consumers or who
are already thinking ethically and responsibly. Other industries are not under such pressure.
In response to the second question, the report states: Indonesia may be able to benefit
from CSR, but it cannot rely on CSR to solve issues of exploitation, environmental
devastation and poor labor standards, particularly when Western finance corporations are
impervious to environmental or labor rights lobbying and community outrage.

The conclusions made by the aforementioned United Nations report may be

somewhat dated since many political and economic changes have occurred in Indonesia since
2001. A recent article by Edward Manik in the June 2008 issue of Frontier titled Corporate
Social Responsibility: The Indonesian Context describes several good examples of CSR
programs by Indonesian corporations. It also notes the continuing controversy over the
inclusion of CSR under Law No. 40 of 2007 on Limited Liability Companies, Article 74
paragraph (1) that states: Companies doing business in and/or in relation to natural resources
must put into practice social and environmental responsibility. This provision is opposed by
many corporations.
The original language of the bill stated that CSR provisions applied to all companies
without exception, but this was altered as a result of protest by the business community. The
legislature finally decided that the CSR provisions would only be applied to companies that
heavily utilize natural resources, such as mining, oil and gas companies, and plantations.
However, the business community has continued to press for changes arguing that CSR
should be voluntary.
The fourth and final paper that I would like to cite is that of Dr. J. L. Gonzales III, a
professor in Golden Gate University, on Corporate Social Responsibility in Asia, which
provides an overview of CSR and its impact on social development with special emphasis on
Asia. The observations and conclusions made by the study are based on country case studies
that include four ASEAN countries, namely, Indonesia, Philippines, Singapore and Thailand.
Dr. Gonzales makes three major conclusions that are consistent with the results of the APEC
study:

Profitable or competitive business climate and wealth accumulation are necessary

preconditions to initiate CSR.

CSR culture in Asian business derives from spiritual and philosophical

underpinnings.

CSR requires a legal framework that promotes openness, partnerships, and

democratization.

Conclusion
I would like to conclude by citing again the challenges that were identified by the
APEC study for both developed and developing countries. For developed countries, the major
CSR challenges include (a) finding appropriate responses to globalization, (b) identifying and
addressing gaps in CSR practices, (c) developing common standards of good practice
throughout the supply chain, and (d) assuring exemplary corporate behavior worldwide. For
developing countries, the major challenges are (a) raising further awareness of CSR, (b)
building capacity within existing institutions that can drive the adoption of CSR, (c) making
the case to the local business community to adopt CSR, and (d) transferring competencies to
individual companies.
It is apparent that for the ASEAN countries, with its geographic, demographic and
economic diversity, the CSR challenges are a mixture or a combination of some or all of the
abovementioned eight challenges.
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Finally, I would like to borrow the opening and closing quotes from Confucius and
Buddha that were used by Dr. Gonzales in his paper, as food for thought for us all.
If ones actions are motivated only by profit, one will have many enemies
Confucius.
Look back at your business and life, at their end, and honestly say that the
years of doing business have had some meaning. We should be able to look
back and see that we have conducted ourselves and our business in a way that
had some lasting meaning and which left some good mark on the world
Buddha.
I cannot end this paper without citing something from the Christian Bible.
A good name is to be chosen rather than great riches, and favor is better than
silver or gold. The rich and the poor have this in common, the Lord is the
maker of them all Book of Proverbs.