Sustainability Accounting and Economic Issues

A. Corporate Business Ethics

Corporate social responsibility (CSR) is divided into economic, legal, and ethical
responsibilities. Also, CSR is seen as integrated corporate activities abiding by the legal
regulations and going beyond compliance, and investing more in human capital, the environment
and the relations with stakeholders; as the business pursuit of sustainable development and focus
on economic, social and environmental aspects; and, as primarily concerned about the
environmental protection and the wellbeing of employees, the community and civil society in
general.
Corporate social responsibility is a hard-edged business decision, not because it is a nice
thing to do or because people are forcing us to do it, but rather because it is good for the
business. Companies with a strategic outlook apply the idea of corporate social responsibility,
which is reflected in their positive financial performance compared to those, which do not
consider CSR as a tool to increase profits. By building a business strategy that aligns social,
environmental, and economic performance with long term business value, corporate
responsibility becomes part of core business and is tied to long-term value creation for both
business and society.
Nowadays, business ethics has a considerable growth in organizations. It is a
comprehensive term covering all ethical issues that arise in the course of doing business. It
represents rules, standards, symbols or principles that provide guidance for ethically appropriate
behavior in management decisions related to company operations, and working relationship with
the community. It applies to all aspects of business behavior and is relevant to the behavior of
individuals and the entire organization. Moreover, the main purpose of ethics in business is to
lead businessmen and businesswomen to abide by the codes of conduct that would help them
secure public confidence in the services and products they offer to the concerned stakeholders.
The role and the importance of Corporate Social Responsibility and Business Ethics are
evident essentially in business development. It is expected in research works speaking about the
major benefits these two concepts may bring to a business. For example, they may:
1. Attract customers to the company’s products, thereby boosting sales and profits;
2. Encourage employees to adhere to the business, reducing labor turnover and therefore
increasing productivity;
3. Attract more employees to the business, thus enabling the company to hire the most
skilled employees; and
4. Attract investors and keep the company’s share price high, thereby protecting the
business from takeover.
B. Responsibility for Investing in Shareholders
One of the concepts of Sustainable Corporate Social Responsibility (Sustainable CSR) is
Socially Responsible Investment (SRI). Socially Responsible Investment (SRI) or ethical
investment is one of the driving factors for the implementation of Corporate Social
Responsibility by a company. This is closely related to the awareness of investors to invest with
social responsibility in mind.
Social Responsible Investment or what is also known as Green or Ethical Investment is
an investment that makes an allocation or investment of money which can make a positive
contribution to the world and leave companies that destroy the world, both society and the
environment.
Usually, Ethical Investment is managed by a securities company. Where in investing in
these securities companies avoid industries that have activities that are detrimental to the
environmental and social sustainability of their surroundings, such as cigarettes, gambling,
alcoholic drinks, deforestation or buying and selling of weapons. Investors prefer investments
that are involved in environmental improvement activities as well as businesses that prioritize
community social relations. This situation encourages companies to compete in applying the
concept of Corporate Social Responsibility (CSR) with the hope of attracting investors and
achieving profits. Companies will think twice if they will carry out unethical activities that will
make investors withdraw their investment, for example causing environmental damage or
causing pollution.
In its development, SRI includes 4 aspects, namely:
1. Social Research, in selecting companies, the things that are done are:
a. Negative screens, the selection criteria used require fund managers to eliminate
certain types of activities or investments. For example, a negative screen will
eliminate investment in companies related to uranium, forest destruction, nature etc.
b. Positive screens, with this approach the fund manager will give preference to certain
investments or activities that are considered socially and environmentally responsible.
For example, in companies that produce renewable green energy.
c. Best of Sector screens, all companies are ranked by social and environmental criteria;
then investments are made only in highly rated companies in each industrial sector.
2. Shareholder Advocacy. In this case the subjectivity of individual values needs to be
considered, because what is called ethical by one individual is not necessarily considered
ethical by another.
3. Social Venture Capital. Placing funds at an early stage in companies (eg companies
engaged in alternative energy) is a profitable way of meeting people's needs before the
shares are publicly traded.
4. Community Investing. Extending affordable credit to people who cannot be served by the
credit market. This will help in creating jobs, building houses or funding community
facilities. Investors must be prepared to accept lower investment returns to encourage
more investment that will help society.
The SRI approach that is usually used is the negative screening approach. In this
approach, investors avoid investing in companies that are engaged in certain industries with
certain criteria and views that they cannot accept. This happens because these investors pay
attention to ethical and moral issues. The emergence of investors like this encourages the
emergence of various investment products that also care about ethical and moral issues.
C. Responsibility for Regulation
ISO 26000: 2010 confirms that one of the seven principles of social responsibility is
compliance with regulations. However, it is also clear in the document that all principles must be
upheld non-negotiable. This means that in the establishment of ISO 26000: 2010, compliance
with regulations is a necessary condition for social responsibility, but it is not a sufficient
condition.
CSR-related regulations themselves have a strategic position, especially to limit the
impact of decisions and actions from companies that can be tolerated by society and the
environment. Therefore, many experts are of the opinion that regulations on CSR should be
related to efforts to clarify boundaries and prevent companies from carrying out Corporate Social
Responsibility (CSI) and CSR-washing.
The consequence of this establishment is that the regulations related to CSR are very
broad, and it would be inappropriate to make it an umbrella regulation. In Indonesia, the entire
scope of the core subject has been regulated in various laws, both general and sectoral. These
laws and their derivative regulations have also found a number of limitations on what a company
can and cannot do.
The best strategy that must be taken if Indonesia wants to restrict companies from
conducting CSI and CSR-washing is to fix these specific regulations. In particular, to ensure that
governance is upright, as well as transparency and accountability of the company to all its
stakeholders.