Ethical Issue of CSR at PT Djarum Kudus Indonesia

A. Introduction

The company awareness upon the needs of long-term profit is more increased. One of the most important non-monetary profits in encouraging the company’s existence in long term was image and reputation of the company. According to the stakeholders, image and reputation of the company will build the company’s public reputation. Corporate Social Responsibility (CSR) is a way attempted by many companies to build their image and reputation in society. Holme and  Watts (2000) addresses that CSR is an important component for the long-term existence of the company because it shows their truly business’s face on the wider society in particular local society around their business area.[1] Thus, CSR can be used by the company to achieve long-term sustainability on the industry where the company runs.

CSR is a global concept adopted by varies industry including tobacco industry. The CSR implementation in the tobacco industry is inseparable from the pro and cons. There are many contradiction on the CSR efforts conducted by the tobacco industry in abroad either by NGOs or WHO (World Health Organization) Palazo & Richter, 2005).[2] On the other hand, some of the massive tobacco industries such as British American Tobacco, Philip Morris International, Imperial Tobacco and Japan Tobacco are successful in publishing their CSR and getting many awards (Palazzo & Richter, 2005, in Fooks, Gilmore, Collin, Holden & Lee, 2013).[3] Still according to Palazzo & Richter, (2005), even, Philip Morris International is courageously to communicate their purpose to their prospective employers as the most successful global company in respecting and being responsible socially. Social depression and government policy are made by the purpose to restrain the movement of the tobacco industry in the future. By the social pressures and government policies that burden the tobacco industry, it is natural that the tobacco industry is said to be in a position sunset industry (Tsang, 1998).[4] CSR can be used as the company’s strategy and answer the challenges of the business to be sustainable socially and environmentally as well as other business issues such as survival and development (Samy, Odemilin and Bampton, 2010).[5]

B. Problem Identification

Some of the companies around Indonesia that implement CSR programs are tobacco companies. Cigarette Indonesia has a different taste to the foreign cigarettes are commonly known by the name of white smoke. Indonesian cigarettes, known as kretek (clove cigarettes), has a different taste for their use clove of raw materials (as an extra flavor) than tobacco as the principal ingredient. In the history of the development of cigarette production tends to increase (Sumarno, 1999).[6]

Table 1. The Top Ten Indonesia’s Companies Version Far Eastern Economic Review, 1999-2001, Point Company

2001 2002 2003 Company Point
1 1 2 Astra 6.06
2 2 3 Indofood 5.9
3 3 6 Sampoerna 5.72
4 4 1 Gudang Garam 5.55
5 5 5 Indosat 5.42
6 8 7 Djarum 5.1
7 9 Telkomsel 5.03
8 Satelindo 4.97
9 7 Sosro 4.95
10 10 SCTV 4.94

From the above table, it is known PT. Djarum included in the 10 large companies capable of performing excellence, be the best marketer. PT. Djarum was the third in the cigarette industry in Indonesia with total production of 20.9 billion cigarettes with a share of 9.3 Billion SKM rod (44.5%). Djarum products distributed to all corners of Indonesia and foreign through integrated and automated distribution network built to provide professional and timely service to customers (Sumarno, 1999).[7]

Djarum as a business entity is one company in Indonesia which has been carrying out CSR programs. Since 1951 Djarum consistently implement various public awareness programs. So that Djarum CSR programs can be run effectively and efficiently, the Djarum established a special foundation to handle CSR programs Djarum. The foundation is named Djarum Foundation was formally established in 1986. Through the Djarum Foundation, Djarum continues to contribute to the development of various fields in Indonesia. State Program Bakti Djarum is the main product of the Djarum Foundation. The purpose of this program is to contribute to building a strong Indonesia which is not only economically but also boasts the sports achievements, academic, preserving the environment and cultural richness. Therefore, Djarum Djarum Bakti Foundation through the State develops its CSR program covers five areas. The five areas include Djarum Social Service, Djarum Bakti Sports, Djarum Bakti Education, Environment and Djarum Djarum Bakti Bakti Budaya. Concern PT. Djarum has been initiated long before its Corporate Social Responsibility (CSR) is widely campaigned in the media. CSR is the social environment care program implemented for the company. In line with CSR programs, environmental awareness social PT. Djarum continues to be developed not only in the Kudus City, but also to the outside Kudus.

This is interesting to be noted that PT Djarum for a long time has been conducting CSR to build its image and reputation in the society. During the process, PT Djarum faces some challenge to implement CSR in order to be accepted by the wider society. Therefore, the problem identification on the paper is:What are the CSR challenges faced by the PT Djarum and the implementation of PT Djarum compared by another tobacco industries in the world?

C. Literature Review

Definition of CRS is trying awarded by various organizations. There are three different perspectives to gain an understanding of CSR, namely:

  1. The World Business Council for Sustainable Development: an ongoing commitment from businesses to behave ethically and contribute to economic development while improving the quality of life of employees and their families, as well as the local community and society at large.
  2. International Finance Corporation: Commitment businesses to contribute to sustainable economic development by working with employees, their families, local communities and society at large to improve their lives in ways that are good for business and development.
  3. Canadian Government: Business activities that integrate economic, environmental and social into the values, culture, decision making, strategy, and operations of companies that are transparent and accountable for creating and developing a healthy society.

In Indonesia, at least there are three factors that drive the emergence of the concept of CSR in Indonesia.[8] First is the international norm that makes the concept of corporate social responsibility as a concept generally accepted and applied throughout the world. Second, the policy of the parent company of a multinational company in his home country has been carrying out corporate social responsibility. The third is that the regulation of the Indonesian government especially after it emerged Law No. 27 of 2007 on Investment and Law No. 40 of 2007 on limited liability companies that drive the organization as a business entity to implement programs of corporate social responsibility.

D. Discussion

CSR is one form of PR strategies that can be used to form a positive image of the company in the eyes of stakeholders. With the company’s CSR program can show concern for the community and the surrounding environment, resulting in a harmonious relationship between the company and the community. Kotler & Lee (2005) explain that CSR is a commitment of the company to improve the society’s wealth by providing positive contribution for the entity of the company resources.[9] Essence of CSR is how the company operates the business practice ethically and takes the voluntary step to participate in improving life quality of the employer particularly and the wider society in general.

PT. Djarum as a company engaged in the tobacco industry would experience the various pros and cons of the society; therefore the company is required to do a CSR program. Some of CRS efforts conducted by PT Djarum are, namely (Angriawan, 2010):[10]

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